Osborne 8.2
Options
jewels.p
Registered Posts: 1,774 Beyond epic contributor 🧙♂️
The Takeover plc. invested £305,000 in 800,000 ordinary share of 10 pence each in the Subsidiary Co Ltd. The Subsidiary Co Ltd's issued share capital and reserves at the date of acquisition were £100,000 in shares and £200,000 in reserves
What is the value for goodwill arising on the acquisition?
a. £20,000
b. £5,000
c. £65,000
d. £6,500
I thought it was b. £5,000 cause I took the amount invested away from the total value of the company being bought but the answer is c. £65,000
WHAT?
What is the value for goodwill arising on the acquisition?
a. £20,000
b. £5,000
c. £65,000
d. £6,500
I thought it was b. £5,000 cause I took the amount invested away from the total value of the company being bought but the answer is c. £65,000
WHAT?
0
Comments

Figure out what percentage of the Subsidiary's company shares has Takeover plc acquired.
then
workout the value of subsidiary's shares acquired at the date of acquisation. Take that value away from the investment value. That is the value of goodwill paid.
The KEY is to figure out the Value of 800,000 shares at the date of acquisation.
good luck!0 
Hi,
I don't have the Osbourne books (or any study books for that matter!!) but I have worked the question for you and will show you how the answer is arrived at. I am working in £,000's here.
The first thing to do is to work out what %age we have bought of the subsidiary. In this case, the share capital of our subsidiary is £100 and we have bought 800 of these shares for a consideration of £305.
The cost of the investment = £305.
The net assets of the subsidiary at acquisition consist of:
 share capital £100
 retained earnings £200
Therefore:
Cost of investment =...................£305
Less net assets
acquired (i.e. what we have 'bought'):
80% x £100 =............................(£80)
80% x £200 =...........................(£160)
Goodwill on acquisition of our subsdry £65
Best wishes
Steve0 
Thanks SDV and Steve
I was taking it to be 100%. (as you probably guessed by the way I worked it out)0
Categories
 All Categories
 1.2K Books to buy and sell
 2.3K General discussion
 18.9K For AAT students
 267 NEW! Qualifications 2022
 147 General Qualifications 2022 discussion
 9 AAT Level 2 Certificate in Accounting
 43 AAT Level 3 Diploma in Accounting
 65 AAT Level 4 Diploma in Professional Accounting
 8.9K For accounting professionals
 23 coronavirus (Covid19)
 274 VAT
 92 Software
 274 Tax
 138 Bookkeeping
 7.3K General accounting discussion
 194 AAT member discussion
 3.8K For everyone
 38 AAT news and announcements
 352 Feedback for AAT
 2.8K Chat and offtopic discussion
 590 Job postings
 17 Who can benefit from AAT?
 36 Where can AAT take me?
 44 Getting started with AAT
 26 Finding an AAT training provider
 48 Distance learning and other ways to study AAT
 25 Apprenticeships
 65 AAT membership