On 31-3-01 carter ltd purchased 80% of the 2000000 ordinary shares of £1 each in Nixon ltd by issuing 1 share in carter for every 2 shares purchased in Nixon. At 31-3-01 the market value of carter was £2.40 but this had fallen to £2 at 30-6-01.At that date the values of identifiable assets of Nixon were:
Aggregate book value £1800000
Aggregate fair value £1700000
NCI using share of net assets
What is the value of goodwill on consolidation at 30-06-01?
How would I work this out please?
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Goodwill
11y ago#180% * 2,000,000 / 2 * $2.40 = $1,920,000 = cost of investment
Nci value of their investment 20% * ??? - we don't know until we know the fair value of the SNA @ DOA
Fair value of the SNA @ DOA is $1,700,000
Therefore value of nci is 20% * $1,700,000 = $340,000
$1,920,000 + $340,000 gives a total worth of the company of $2,260,000 and FV of SNA @ DOA are $1,700,000 gives us a goodwill amount of $560,000
Ok?
Ok yeah I get that thanks for that - I got another 2 questions -
A has purchased it's head office using debt finance, and B leases its head office under operating lease.Both entities use their head office for admin purposes. Which ratios would be incomparable between the 2 - gross profit margin, NCA t/o, roce, current ratio, gearing and interest cover?
Also manco purchased £10m 5% bonds in a year. If both contractual cash flow characteristics test and the business model test are passed and manco wish to use alternative treatment how should the bond be accounted for?
11y ago#3GP margin will not be affected
Asset turnover will be affected
ROCE will be affected
Current ratio will not be affected
Interest cover will be affected
Where both tests are satisfied, the asset should be at amortized cost BUT it MAY be shown at fair value through profit or loss if, by adopting this alternative, it eliminates or reduces significantly an inconsistency in measurement
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