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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › consolidation
P acquired 75% of the share capital of S on its incorporation. The Statements of Financial Position of the two entities as at 31 December 2010 are as follows:
Investment in S at cost $15,000
share capital in s $20,000
find goodwill.
Your formula says:
P cost of investment 75% = $15,000
fair value of non controlling interest 25%/75% X $15000 = $5000
therefore $15000 + $5000 = $20,000
retained earnings =$0
$20,000 – Share capital of S $20,000 = 0
therefore goodwill = 0
Sir, where you not supposed to deduct the $5000 from share capital of S $20,000 =$15,000 =( $15000-$15000 =$0) you added the $5000 to the cost of investment.
5,000 is added to the cost of the investment to get the full value of S at the date of acquisition.