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Honey Co acquired 75% of Bee Co on 1 April 2013, paying $2 for each ordinary share acquired. The fair value of the non-controlling interest at 1 April 2013 was $300. Bee Co’s individual financial statements as at 30 September 2013 included:
Statement of financial position: $
Ordinary share capital ($1 each) 1,000
Retained earnings 710
1,710
Statement of profit or loss:
Profit after tax for the year 250Profit accrued evenly throughout the year.
What was goodwill on acquisition at 1 April 2013?
A $715
B $90
C $517
D $215The answer is D but i couldn’t figure out why
Thanks in advanceThe cost of the shares = 750 x $2 = $1,500
The fair value of the NCI = $300
So total = 1500 + 300 = $1,800Total value of Bee at the start of the year = (sh cap) 1,000 + (reserves) (710 – 250) = 1,460
Profit up to 1 April 2013 = 6/12 x 250 = 125.
So total = 1460 + 125 = $1,585Goodwill = 1800 – 1585 = $215
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