consolidated a/c

meibaker

A invested £220,000 in 120,000 ordinary shares of £0.50 each of B, the issued share capital adn reserves of B at the time of acquisition were £80,000 in shares and £60,00 in reserves, so what is the value of goodwill arising on acquisition?
please help!

Steve Collings

The first thing to do is to work out how much A owns in B's share capital. A has purchased 120,000 B shares for (120,000 x 0.50) = 60,000 shares owned by A. This represents a 75% holding in B (i.e. 60,000 shares purchased / 80,000 shares).

Therefore:

Cost of investment.........................................220,000

Net assets acquired:
75% of 80,000 share capital.............................(60,000)
75% of 60,000 reserves...................................(45,000)

Goodwill........................................................115,000

Regards
Steve

meibaker

thank you very much for your time steve!
very appreciated!
regards may