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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FA – FIA FFA › Share

  • This topic has 4 replies, 2 voices, and was last updated 7 years ago by John Moffat.
Viewing 5 posts - 1 through 5 (of 5 total)
  • Author
    Posts
  • January 30, 2016 at 2:54 pm #298560
    Abror
    Member
    • Topics: 75
    • Replies: 38
    • ☆☆

    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…

    January 30, 2016 at 2:55 pm #298561
    Abror
    Member
    • Topics: 75
    • Replies: 38
    • ☆☆

    I tried solve relying on your lecture but it didn’t work out…

    January 31, 2016 at 9:16 am #298622
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    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 – 4.75M

    January 31, 2016 at 11:09 am #298713
    Abror
    Member
    • Topics: 75
    • Replies: 38
    • ☆☆

    Ok..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…

    January 31, 2016 at 1:51 pm #298722
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51555
    • ☆☆☆☆☆

    The share price is of no relevant.

    The fair value of the net assets at the date of acquisition is all that matters (and this effectively includes retained earnings).

    The share price takes into account shareholders expectation of future earnings, but this is not relevant for Paper F3.

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