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chapter 22 example 3, I Have Watched your lectures. kindly assist.
Sir why did you add the $10,000, to the $15,000 and $9,000. wasnt the $10,000 already addeded in the the cost of investment?
The net assets of the subsidiary at the date of acquisition were equal to the share capital plus the retained earnings at the date of acquisition plus the fair value adjustment.
So at the date of acquisition, the net assets of S were worth $34,000 (10,000 + 15,000 + 9,000).P paid $60,000 for 100% of S, and therefore they paid 26,000 (60,000 – 34000) more than the net assets were worth, and therefore this 26,000 is the goodwill that they were buying.
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