Using the same facts as before, but measuring non-controlling interest at its fair value of £95,000 at acquisition, what is goodwill?
Answer and explanation
Correct answer: C. £145,000
- Step 1: Goodwill = consideration + NCI at fair value − net assets at fair value.
- Step 2: = £500,000 + £95,000 − £450,000.
- Step 3: = £145,000. The only difference from the proportionate method is the NCI figure.
Answer
£145,000.
Why not the others: £140,000: This uses the proportionate share of net assets (£90,000) rather than the fair value of £95,000. £235,000: This adds both NCI figures. £595,000: This adds the NCI of £95,000 to the consideration but forgets to deduct the net assets acquired.
Practise more Consolidated financial statements.
Free questions with an explanation for every one, and full timed ACCA Applied Knowledge (BT, MA, FA) mock tests.
More Consolidated financial statements questions
- Parent plc acquires 80% of the ordinary shares of Sub Ltd for £500,000. At the date of acquisition the net assets of Sub Ltd were £450,000 a…
- At the year end, Sub Ltd, an 80% owned subsidiary, has net assets of £520,000. What non-controlling interest is shown in the consolidated st…
- Parent plc sold goods to its 75% subsidiary for £120,000, at a mark-up of 25% on cost. Half of these goods remain in the subsidiary's invent…
- Parent plc has trade receivables of £60,000 and Sub Ltd has trade receivables of £40,000. Sub Ltd owes Parent plc £8,000, which is included…
- Parent plc owns 75% of Sub Ltd, acquired when Sub's retained earnings were £100,000. Parent's retained earnings are £300,000 and Sub's are £…
- Sub Ltd made a profit of £120,000 for the year ended 31 December. Parent plc acquired control of it on 1 October. Profits arise evenly throu…