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Mini Exercises – Goodwill (Question 16)

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.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • November 8, 2015 at 3:48 am #281067
    Amit
    Member
    • Topics: 41
    • Replies: 32
    • ☆☆

    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 1,000

    As per my understanding of the question;
    Ret earnings b/f 1,500
    Ret earnings 3 months 500

    Sir, what am i missing in the question, Pls kindly explain sir.

    November 8, 2015 at 7:03 am #281077
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23327
    • ☆☆☆☆☆

    Hi

    Thanks for this – yes, the pre-acquisition period should be 3 months, not 6. It will be altered next time

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