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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?
Suggested Answer: A
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35 comments · newest first
EM
Emogene
11 months ago
$450,000 seems way too low for goodwill, right?
LE
Leah
11 months ago
Definitely going with option B, seems right to me!
NI
Nieves
11 months ago
Wait, how does the building's fair value affect this?
JO
Jody
12 months ago
I think the goodwill will be around $1.45 million.
JE
Jerilyn
12 months ago
Goodwill is calculated as the purchase price minus the fair value of net assets.
CA
Carrol
1 year ago
I think the goodwill calculation involves the purchase price, but I can't recall how to factor in the retained earnings of CD.
KI
Kiley
1 year 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?
LA
Larue
1 year ago
This question seems similar to the practice ones we did on acquisitions. I think we need to consider the fair value adjustments too.
CE
Cecily
1 year ago
I remember we discussed how to calculate goodwill, but I'm not sure if I got the non-controlling interest right.
NA
Natalie
1 year 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.
SA
Sabrina
1 year ago
I'm feeling pretty confident about this one. The key is to focus on the fair value adjustments and the non-controlling interest.
JO
Josephine
1 year 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.
VI
Vi
1 year 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.
NO
Nobuko
1 year ago
This looks like a tricky consolidation question. I'll need to carefully calculate the fair value adjustments and goodwill.
RA
Raul
1 year 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.
WH
Whitley
1 year ago
Ugh, I'm drawing a blank. Time to start eliminating the options that don't make sense.
ST
Starr
1 year 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.
JO
Jody
1 year ago
I remember we discussed how Security Policy A might need to adapt when integrating with the new perimeter service to maintain compliance.
AN
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.
MI
Micaela
1 year ago
Yeah, it's all about understanding the fair value of the net assets.
TI
Tiffiny
1 year ago
That makes sense, the goodwill calculation can be tricky.
HO
Hollis
1 year ago
I think the answer is B) $1,450,000.
RE
Regenia
2 years 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)).
AN
Antonette
2 years 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)).
AL
Aliza
1 year ago
I agree with you, the answer is D) $570,000.
LA
Lamonica
1 year ago
Actually, I think it's C) $950,000.
GR
Gracie
1 year ago
I believe it's B) $1,450,000.
TA
Tamekia
1 year ago
I think the answer is A) $450,000.
DA
Dannette
2 years ago
But the fair value of the building in excess of its carrying amount should be considered in calculating goodwill.
AL
Alton
2 years 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)).
TH
Thurman
1 year ago
User 2
AD
Adelle
1 year ago
User 1
AN
Annabelle
2 years ago
I disagree, I believe the answer is C) $950,000.
SO
Solange
2 years 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)).
DA
Dannette
2 years ago
I think the answer is B) $1,450,000.