- This topic has 1 reply, 2 voices, and was last updated 8 years ago by
.
- Posts
Dear sir,
I have a problem with the following questionCloud obtained a 60% holding in the 100,000 $1 shares of Mist on 1 January 20X8, when the retained earnings of Mist were $850,000. Consideration comprised $250,000 cash, $400,000 payable on
1 January 20X9 and one share in Cloud for each two shares acquired. Cloud has a cost of capital of 8% and the market value of its shares on 1 January 20X8 was $2.30.Cloud measures non-controlling interest at fair value. The fair value of the non-controlling interest at 1 January 20X8 was estimated to be $400,000.
What was the goodwill arising on acquisition?
$139,370
$169,000
$119,370
$130,370My problem is with the share for share exchange. If it says One in cloud for every 2 shares acquired, isn’t it same to 1 share of parent to 2 shares of subsdiary?
Could you explain this to me?
Thanks!
We acquire 60% of the 100,000 Mist shares = 60,000 shares acquired
In exchange (as well as cash and deferred cash) we issue 1 share in Cloud for every 2 shares in Mist acquired = 30,000 shares in Cloud issued
And each of those 30,000 shares has a value of $2.30 = $69,000 worth of shares issued
OK?
- The topic ‘Finding goodwill’ is closed to new replies.