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– Question –
A obtained a 60% holding in the 100,000 £1 share of B on 01/01/2008, when the retained earnings of B were £850,000. Consolidation comprised £250,000 cash, £400,000 payable on 01/01/2009 and one share in A for each 2 shares acquired. A has a cost of capital of 8% and the market value of its shares on 01/01/2008 was £2.30.A measures non-controlling interest at fair value. The fair value of non-controlling interest at 01/01/2008 was estimated to be £400,000.
What was the goodwill arising on acquisition?
– Answer –
Consolidation transferred:
Cash 250,000
Deferred consideration(400,000/1.08) 370,370
Shares(30,000x£2.30) 69,000
Fair value of non-controlling interest 400,000Fair value of net asset:
Shares (100,000)
Retained earnings (850,000)
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139,370– Query –
Regarding Shares(30,000x£2.30) ,where did this 30,000 come from?It’s the number of shares that A had to issue in the acquisition of 60% of B at the market value of the A shares immediately before acquisition
Ok?
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