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Goodwill Calculation for Acquisitions

The document discusses calculating goodwill on acquisition of companies. It provides examples of calculating goodwill based on share prices and net asset values. It also provides a case study on calculating goodwill for the acquisition of one company by another, including journal entries to record the transaction.

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Ashik Uz Zaman
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19 views1 page

Goodwill Calculation for Acquisitions

The document discusses calculating goodwill on acquisition of companies. It provides examples of calculating goodwill based on share prices and net asset values. It also provides a case study on calculating goodwill for the acquisition of one company by another, including journal entries to record the transaction.

Uploaded by

Ashik Uz Zaman
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Ch 14: Other Company Issues 497

Questions

Goodwill on acquisition (14.1 – 14.6)


14.1 Calculation of goodwill on acquisition – market value
Calculate goodwill on acquisition (gain on acquisition) in each of the following unrelated circumstances:
(a) As at 30 June 20X2:
Number of shares on issue 5 000 000
Price per share on the stock exchange $1.19
Net tangible assets $5 450 000
(b) As at 31 December 20X2:
Number of shares on issue 8 600 000
Price per share on the stock exchange $2.80
Net tangible assets $23 000 000
(c) As at 30 June 20X3:
Number of shares on issue 5 000 000
Price per share on the stock exchange $1.85
Net tangible assets $9 500 000
(d) As at 30 June 20X4:
Number of shares on issue 7 000 000
Price per share on the stock exchange $2.05
Tangible assets $18 000 000
Liabilities $4 000 000
(e) As at 31 May 20X3:
Number of shares on issue 10 000 000
Price per share on the stock exchange $1.57
Tangible assets $18 700 000
Intangible assets $1 200 000
Liabilities $4 500 000

14.2
Stacker Ltd acquired all the issued shares of Faxfare Ltd on 30 June 20X9. Details are:
Number of Faxfare Ltd’s shares on issue 20 000 000
Price per share on the stock exchange $0.92
Tangible assets $22 000 000
Liabilities $4 000 000

Required:
(a) calculate the amount paid for goodwill on acquisition;
(b) assuming Stacker Ltd paid the purchase consideration in cash, show the general journal entry in the books of
Stacker Ltd for the acquisition; and
(c) assuming Stacker Ltd paid the purchase consideration by the issue of shares at an agreed price of $1.60 per share,
show the general journal entry in the books of Stacker Ltd for the acquisition.

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