Home For AAT student members AQ 2013 AAT Level 4 (Level 8 in Scotland)

Financial Statements - Goodwill & Non-controlling interest

mrderek88mrderek88 Feels At HomeElgin, ScotlandRegistered Posts: 44
Hi

I can't get my head round goodwill. Can someone please help me out with the following question? This is when Distance Learning is difficult.

Goodwill
Wyvern invested £260,000 in 150,000 ordinary shares of £1 each in Sidbury Ltd. At the date of acquisition the equity of Sidbury Ltd comprised £200,000 in share capital and £120,000 in retained earnings.

I have the calculation as:
Cost of investment: £260,000
Value of subsidiary £320,000
(share capital + retained earnings)
Goodwill -£60,000

The correct answer is £20,000???

Thanks, Derek

Comments

  • MarcoMarco Registered Posts: 23
    (150000/200000)*100= 75% share of Wyvern
    Cost of invest is £260000
    75% of 200,000 share=150,000
    75% of 120,000 retained = 90,000
    Good will = 260,000-(150000+90000)= 20,000
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