Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FR Exams › Mini Exercises – Goodwill (Question 16)
- This topic has 1 reply, 2 voices, and was last updated 9 years ago by
MikeLittle.
- AuthorPosts
- November 8, 2015 at 3:48 am #281067
On 1 January, 2014 P acquired 80% of the $1 equity shares in S. The consideration was settled by a share for share exchange of 2 shares
in P for every 3 shares in S acquired. At the date of acquisition the respective fair values for the shares in P and in S were $3 and $2.50. In
addition, P has agreed to pay 27.5 cents per share acquired on 1 January, 2015.
The directors of P value non-controlling interests on a fair value basis and the share price of the S shares can be taken to be representative
of the fair value. P’s cost of capital is 10% per annum.
Profits for the year for P and for S were $8,000 and $2,000 respectively
At the date of acquisition the carrying value of the S net assets was equal to their fair value with the exception of the S property that had
a fair value $4 million in excess of its carrying value
Extracts from the two companies’ financial statements as at 30 September 2014 were:
P S
$1 Equity shares 10,000 9,000
Revaluation surplus 2,000 -Retained earnings 6,300 3,500->
As per solution in the course notes;
Ret earnings b/f 1,500
Ret earnings 6 months 1,000As per my understanding of the question;
Ret earnings b/f 1,500
Ret earnings 3 months 500Sir, what am i missing in the question, Pls kindly explain sir.
November 8, 2015 at 7:03 am #281077Hi
Thanks for this – yes, the pre-acquisition period should be 3 months, not 6. It will be altered next time
- AuthorPosts
- You must be logged in to reply to this topic.