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Roe Co acquired 80% of the share capital of Gallant Co on 1 October 20X7. The consideration was a cash
payment of $6 and four $0.50 shares in Roe Co, worth $2.50 each, for each share in Gallant Co. Both
companies have an accounting year end of 31 March.
On 1 October prior to the acquisition, Roe Co had issued share capital of 750,000 $0.50 shares and a share
premium account of $165,000. Roe Co’s retained earnings as at 1 April 20X7 were $760,000 and its retained
profits for the year ended 31 March 20X8 were $280,000.
At 1 April 20X7 Gallant Co had issued share capital of 50,000 $1 shares and retained earnings of $520,000.
Gallant Co did not issue any shares between 1 April and 1 October 20X7. During the year ended 31 March
20X8 Gallant made a profit of $150,000, which accrued evenly over the year. The fair value of the noncontrolling interest at 1 October 20X7 was $110,000.
There were no intra-group transactions during the year ended 31 March 20X8.
Required
(a) Complete the following proforma to calculate the goodwill arising on the acquisition of Gallant Co.
Consideration transferred on acquisition:There is no point in typing out a full question and expecting to be provided with a full answer – that is not what we are here for!
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