Vinci Ltd paid $65,000 on 1.1.20X0 to acquire 75% of Bhatti's 100,000 $1 ordinary shares. At...

Vinci Ltd paid $65,000 on 1.1.20X0 to acquire 75% of Bhatti's 100,000 $1 ordinary shares. At the date of acquisition Bhatti's quoted share price was 0.71$ it had accumulated losses totaling 40,000$ and the fair value of its non-current assets exceeded their book value by 45,000$. What is the goodwill/badwill under Method 2?

Expert Solution

Goodwill Amount = $ 6,750

Solution

Goodwill = Purchase Consideration - Net Assets
Net Assets = Shareholders Funds = Total Assets - External Liabilities

	Purchase Consideration Paid		65,000
	Shareholders Funds or Net Assets
	Share Capital acquired (75% of 1,00,000)	75,000
	Quoted per share price	0.71
	Total quoted price (75,000 x 0.71)	53,250
Less:	Accumulated Losses	-40,000
		13,250
Add:	Increase in fair value of assets	45,000
		58,250
	Net Assets		58,250

	Goodwill (65,000 - 58,250)		6,750


Note : -	The question asks for goodwill calculation under method 2, but it does not specify the method name.
	Please do comment in case you require calculation under different method.

ekkarill92 answered 2 years ago

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