CIMAPRA19-F02-1 Exam - Topic 1 Question 93 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 93
Topic #: 1

ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings of CD were S3,550,000. CD has no other reserves.

ST paid $5,600,000 for the shares in CD and the non controlling interest was measured at its fair value of S1,400,000 at acquisition.

At 1 January 20X3, the fair value of CD's net assets were equal to their carrying amount, with the exception of a building. This building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25 years on 1 January 20X3.

At 31 December 20X5, the retained earnings of ST and CD were $8,500,000 and $5,250,000 respectively.

What is the value of goodwill to be included in the consolidated statement of financial position of ST as at 31 December 20X5?

A$450,000

B$1,450,000

C$950,000

D$570,000

Show Suggested Answer

Suggested Answer: A

by Isadora at Jul 12, 2024, 02:41 PM

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Emogene

6 months ago

$450,000 seems way too low for goodwill, right?

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Leah

6 months ago

Definitely going with option B, seems right to me!

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Nieves

6 months ago

Wait, how does the building's fair value affect this?

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Jody

7 months ago

I think the goodwill will be around $1.45 million.

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Jerilyn

7 months ago

Goodwill is calculated as the purchase price minus the fair value of net assets.

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Carrol

7 months ago

I think the goodwill calculation involves the purchase price, but I can't recall how to factor in the retained earnings of CD.

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Kiley

7 months ago

I feel like I might have mixed up the calculation for the excess fair value of the building. Was it $1,000,000 over 25 years?

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Larue

8 months ago

This question seems similar to the practice ones we did on acquisitions. I think we need to consider the fair value adjustments too.

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Cecily

8 months ago

I remember we discussed how to calculate goodwill, but I'm not sure if I got the non-controlling interest right.

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Natalie

8 months ago

This is a lot of information to process. I better make sure I don't miss any important details when working through the calculations.

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Sabrina

8 months ago

I'm feeling pretty confident about this one. The key is to focus on the fair value adjustments and the non-controlling interest.

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Josephine

8 months ago

Okay, I think I've got a handle on this. I'll start by determining the fair value of the net assets acquired and then calculate the goodwill.

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Vi

8 months ago

Hmm, I'm a bit confused by all the details here. Let me re-read the question and try to break it down step-by-step.

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Nobuko

8 months ago

This looks like a tricky consolidation question. I'll need to carefully calculate the fair value adjustments and goodwill.

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Raul

8 months ago

Based on the options provided, it looks like the Analytics REST API or the Microsoft Azure SQL Data Warehouse Connector used in conjunction with dataflows/recipes would be the best approaches to meet these requirements.

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Whitley

8 months ago

Ugh, I'm drawing a blank. Time to start eliminating the options that don't make sense.

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Starr

8 months ago

This seems like a tricky one. I'm not sure if I should use a lambda function, a custom function, or something else. I'll need to think it through carefully.

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Jody

8 months ago

I remember we discussed how Security Policy A might need to adapt when integrating with the new perimeter service to maintain compliance.

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Annelle

1 year ago

This question is a real head-scratcher, but I think I've got it figured out. The answer is B, and I'm as surprised as anyone! I guess I'm just a natural at this accounting stuff. Or maybe I'm just really good at guessing. Either way, I'm feeling pretty confident about this one.

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Micaela

1 year ago

Yeah, it's all about understanding the fair value of the net assets.

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Tiffiny

1 year ago

That makes sense, the goodwill calculation can be tricky.

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Hollis

1 year ago

I think the answer is B) $1,450,000.

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Regenia

1 year ago

Hmm, this question is really making me scratxh my head. Let me think this through... Okay, I've got it! The answer is A. The excess fair value of the building is $1,000,000, and ST acquired 75% of CD, so the goodwill should be $450,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Antonette

1 year ago

This is a tricky one, but I believe the answer is D. The question states that the fair value of CD's net assets was equal to their carrying amount, except for the building. The building had a fair value of $1,000,000 in excess of its carrying amount, and ST acquired 75% of CD, so the goodwill should be $570,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Aliza

12 months ago

I agree with you, the answer is D) $570,000.

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Lamonica

12 months ago

Actually, I think it's C) $950,000.

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Gracie

1 year ago

I believe it's B) $1,450,000.

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Tamekia

1 year ago

I think the answer is A) $450,000.

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Dannette

1 year ago

But the fair value of the building in excess of its carrying amount should be considered in calculating goodwill.

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Alton

1 year ago

I'm not sure about this one. The question seems a bit confusing, but I think the answer is C. The excess fair value of the building is $1,000,000, and ST acquired 75% of CD, so the goodwill should be $950,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Thurman

1 year ago

User 2

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Adelle

1 year ago

User 1

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Annabelle

1 year ago

I disagree, I believe the answer is C) $950,000.

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Solange

1 year ago

I think the answer is B. The question states that ST paid $5,600,000 for the shares in CD, and the non-controlling interest was measured at $1,400,000. The fair value of CD's net assets, excluding the building, was equal to their carrying amount. The building had a fair value of $1,000,000 in excess of its carrying amount, so the total fair value of CD's net assets was $1,000,000 more than their carrying amount. Since ST acquired 75% of CD, the goodwill should be $1,450,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Dannette

1 year ago

I think the answer is B) $1,450,000.

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