CIMA Exam CIMAPRA19-F02-1 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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Dannette

3 days 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

3 days 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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Annabelle

6 days ago

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

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Solange

6 days 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

13 days ago

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

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