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Hi John,
Here is a question and it’s answer from Kaplan Exam Kit
My question is why have they used $400,000 as consideration when in the notes it’s given as $300,000, when calculating Goodwill????
To my knowledge, I would use $300,000 as consideration, so I would get a Goodwill of $130,000.
Hence in NCAs, There will be:
PPE – $555,000
Investment – $100,000 (Considering that this value is some other investment)
Goodwill – $130,000Everything you have written is correct.
Unfortunately it is a typing error by Kaplan. Note 1 should say $400,000 (not $300,000).
Thanks John for your reply.
When you said that everything I wrote is correct.. I assume that my treatment of $100,000 as a separate investment in NCA is also correct, if ever in a question it was given like that..
(Just asking.. to be on the safe side)
Yes – your treatment would be completely correct if it had not been a typing mistake.
However, that would not happen in the exam – if there had been another investment also then the question would say that in the exam.We were told that the 100000 was another investment and not a typing error. Note it says, “Investments” (plural) in the initial balance sheet. And usually when there is a sole investment it goes like “Investment in Company X” , etc.
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