This is from the Osbourne questions I keep getting £175000
Ateeb92
Registered Posts: 8
Leme plc invested £475,000 in 300,000 ordinary shares of £1 each in Avon Limited.
At the date of acquisition the equity of Avon Limited comprised £500,000 in share capital and £150,000 in retained earnings.
What is the value of goodwill at the date of acquisition?
£25,000
£200,000
£85,000
£175,000
At the date of acquisition the equity of Avon Limited comprised £500,000 in share capital and £150,000 in retained earnings.
What is the value of goodwill at the date of acquisition?
£25,000
£200,000
£85,000
£175,000
0
Comments
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I think I have been able to find the solution.
It's...
300,000 ordinary shares divided by £500,000 of share capital X 100 = 60% ownership
GOODWILL:
Investment - £475,000
Less Share Capital - (60% X 500000) = -£300,000
Less Retained Earnings - (60% X 150000) = -£90,000
Therefore gives the answer = £85,0000
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