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Afternoon Mr John…
Tinsel Co has 5 million $1 issued ordinary shares.At 1 May 20X0 Fairy Co purchased 60% of Tinsel Co’s $1 ordinary shares for 4 million.At that date Tinsel Co had net assets with a fair value of 4,750,000 and a share price of $1.10.Fairy Co valued the non-controlling interest in Tinsel Co at acquisition as 2,2 million…
What is the total goodwill on acquisition at May 20X0.I thought of it for 40 minutes but I couldn’t figure out what to do…I’m totally zero for this question…
Thank you…Surely you have an answer in the same book in which you found the question? (If not then you should be using a different book).
The workings are exactly the same as in the lecture.
The total value placed on Tinsel is the consideration of $4M plus the value of the NCI of $2.2M. So a total of $6.2M.
The fair value of the assets is $4.75M.
Therefore the goodwill is 6.2M – 4.75MOk..But what about extra information…I don’t understand..
Reading question, I would assume company has got 5 million shares worth of $1 each and probably retained earnings…
But here it says net assets 4750,000 and share price of 1.10….
How is that even possible. I canttttt comprehend….Please explain it to me…
Many thanks…
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