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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?

Solutions

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 1 year ago
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