P Co. acquired 60% of the 200,000 $1 equity shares of S Co. on 1 April 2021
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Question:
P Co. acquired 60% of the 200,000 $1 equity shares of S Co. on 1 April 2021 when the retained earnings of S were $350,000. Consideration comprised 300,000 by cash, and X payable on 31 March 2022, and 2 shares in P for each 5 shares acquired. The book values of S’s net assets at acquisition date were equal to their fair values except a borrowing which had a book value of $400,000 and a fair value of $500,000.
The market value of P’s shares on 1 April 2021 was $1.5 and P has a cost on capital of 10%.
Requirements: Find X value so that the goodwill at the acquisition date is positive. Calculate the goodwill arising on acquisition.
Related Book For
Financial Accounting An Integrated Statements Approach
ISBN: 978-0324312119
2nd Edition
Authors: Jonathan E. Duchac, James M. Reeve, Carl S. Warren
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