ExpertMedium1 markShort Answer
ACCA · Question 38 · Preparing simple consolidated financial statements
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
Calculate the Goodwill arising on acquisition. (Enter numbers only)
Scenario: TechNova PLC acquired 80% of CyberNetix Ltd on 1 Jan 20X5 for $500,000 cash. At acquisition, CyberNetix's retained earnings were $200,000 and share capital was $100,000. NCI fair value at acquisition was $120,000. During 20X5, TechNova sold goods to CyberNetix for $80,000 (25% mark-up on cost). Half remained in inventory at year-end (31 Dec 20X5). CyberNetix's 20X5 profit was $150,000.
Calculate the Goodwill arising on acquisition. (Enter numbers only)
How to approach this question
Goodwill = Consideration + NCI at acquisition - Net assets at acquisition.
Full Answer
Goodwill = Consideration ($500,000) + NCI at acquisition ($120,000) - Net assets at acquisition ($300,000) = $320,000.
Common mistakes
Forgetting to add the NCI, or using the parent's share of net assets instead of 100%.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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