consolidated balance sheet

System
System Posts: 100,534 🤖 Admin 🤖
edited June 18 in AAT student discussion
please help if you are given this in the foot notes eg. jake limited acqired 600,000 shares, in x limited i know you would use this to calculate the percentage acquired, but how would you treat it if they said 600, 000shares at a cost of x, would you use this as cosideration and how would you treat this

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  • System
    System Posts: 100,534 🤖 Admin 🤖
    consolidated balance sheet

    I would guess they are telling you the cost paid so you can calculate the goodwill on the acquisition. If it said x limited acquired 60% of a subsidary by purchasing 600,000 shares with a nominal value of £1 at a cost of £900,000 when the subsidary had £100,000 in reserves. Then you could calculate the goodwill on the purchase by deducting the nominal value of the shares and 60% of the reserves from the amount paid. <BR><BR>Amount Paid £900,000<BR>Less Nominal Value Of Share (£600,000)<BR>Less 60% of Subsidary Reserves at time of acquisition (£60,000)<BR><BR>Equals Goodwill on Acquisition (900,000- 600,000 - 60,000) = £240,000<BR><BR>Not an easy one to explain but hope this helps,<BR><BR>Dave
  • System
    System Posts: 100,534 🤖 Admin 🤖
    consolidated balance sheet

    not understanding,
  • System
    System Posts: 100,534 🤖 Admin 🤖
    consolidated balance sheet

    Hi every body,<BR><BR>I will try my best to answer your question. you said "if you are given this in the foot notes eg. jake limited acqired 600,000 shares, in x limited i know you would use this to calculate the percentage acquired, but how would you treat it if they said 600, 000shares at a cost of x, would you use this as cosideration and how would you treat this". you will use this to calculate the good will by taking the "x" amount in concideration.<BR><BR>For example if they told you that they acquired 600,000 shares at a cost of lets say 1,200,000. you have to see the total shares the subsidiary company has " lets assume the total cost of ordinary share capital is 1,000,000 and the nominal value of each share is 1 " then first of all you have to calculate for the total shares of subsidiary comany ( total ordinary shares= total cost of ordinary share capital/nominal value per share" 1,000,000/1= 1,000,000 ordinary shares) then take the perentage of the capital structure (i.e. for the parent compny (Jake LTD) 600,000/1,000,000X100= 60% & the balance will go for minority interest 100-60=40%). You can see that amount invested is not taken in consideration when you calculate the percentage, but it will help when you calculate for the goodwill.<BR><BR>
  • System
    System Posts: 100,534 🤖 Admin 🤖
    consolidated balance sheet

    thanks much, I understand now, this clears all my doubt

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