ExpertThis question is part of a case study — click to read the full scenario(Case 36)
SCENARIO: On 1 January 20X5, Horizon Renewables (a public utility) acquired 80% of the equity share capital of WindTech Innovations (a tech startup) for $5,000,000. Non-controlling interest (NCI) is measured at fair value, which was $1,100,000 at acquisition. WindTech's net assets at acquisition were $4,500,000 (which included a fair value uplift on patents of $500,000). During the year, Horizon sold turbines to WindTech for $800,000 at a 25% mark-up on cost. Half of these remain in inventory at year-end (31 Dec 20X5). Horizon's receivables include $150,000 due from WindTech, but WindTech's payables show $100,000 due to Horizon (the difference is cash in transit). WindTech's profit for the year was $600,000 (assume no extra depreciation on the patent).
Calculate the Goodwill arising on acquisition. (Enter the number only)
ACCA · Question 37 · Group Consolidations
SCENARIO: On 1 January 20X5, Horizon Renewables acquired 80% of WindTech Innovations for $5,000,000. NCI fair value was $1,100,000. WindTech's net assets at acquisition were $4,500,000 (including a fair value uplift on patents of $500,000). During the year, Horizon sold turbines to WindTech for $800,000 at a 25% mark-up on cost. Half remain in inventory at year-end. Horizon's receivables include $150,000 due from WindTech; WindTech's payables show $100,000 due to Horizon. WindTech's profit for the year was $600,000.
What was the book value of WindTech's net assets immediately before the fair value uplift on patents? (Enter the number only)
SCENARIO: On 1 January 20X5, Horizon Renewables acquired 80% of WindTech Innovations for $5,000,000. NCI fair value was $1,100,000. WindTech's net assets at acquisition were $4,500,000 (including a fair value uplift on patents of $500,000). During the year, Horizon sold turbines to WindTech for $800,000 at a 25% mark-up on cost. Half remain in inventory at year-end. Horizon's receivables include $150,000 due from WindTech; WindTech's payables show $100,000 due to Horizon. WindTech's profit for the year was $600,000.
What was the book value of WindTech's net assets immediately before the fair value uplift on patents? (Enter the number only)
How to approach this question
Full Answer
Common mistakes
Practice the full ACCA FA — Financial Accounting Practice Exam 3
65 questions · hints · full answers · grading