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Goodwill at acquisition

Hi, can anyone help I have done a practise question and my goodwill calculation is somehow out by 228, any help appreciated.

Parent invested £20,000 in subsidiary for 8,000 ordinary £1 shares. The parent has 80% control.

Share capital was 10,000, Retained earnings at acquisition was 6,400, share premium was 2,000 and there is a reevaluation surplus of 1,500 (total figure). Goodwill is impaired by 15%.

Non controlling interest is valued at the proportionate share of net assets

I have the calculation as below:

Consideration - 20,000
NCI - 3,740
Net assets acquired - -18,700
Impairment - 1,800
Total - 3,240

The actual answer is 3,468

Best Answer

  • PeterCPeterC Registered, Tutor Posts: 224
    Accepted Answer
    Net assets = equity = 10,000 + 6,400 + 2,000 + 1,500 = 19,900
    Goodwill at acquisition = 20,000 - (19,900 x 80%) = 4,080
    Goodwill at end of period = 4,080 - 15% = £3,468
    LucySherwood

Answers

  • LucySherwoodLucySherwood Registered Posts: 12
    PeterC said:

    Net assets = equity = 10,000 + 6,400 + 2,000 + 1,500 = 19,900
    Goodwill at acquisition = 20,000 - (19,900 x 80%) = 4,080
    Goodwill at end of period = 4,080 - 15% = £3,468

    Thank you so much! I didn’t realise to use the total figure for the reavaluation but now I see why it is that way.
  • PeterCPeterC Registered, Tutor Posts: 224
    You're welcome
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