Question

On 1 January 2009, Hornet plc acquired 30% of equity shares of Alton plc for $...

On 1 January 2009, Hornet plc acquired 30% of equity shares of Alton plc for $ 2 M. The fair value of net assets of Alton at this date was $6. Alton earned a profit of $ 2 M for year ended 31/12/2009 and paid $ 1 dividend. On 1 January 2010, Hornet acquired an additional 60% in Alton for a further cash payment of $ 6 M. The fair value of identifiable net assets of Alton at 1 January 2010 was $ 8M. The full goodwill method is used.

Use the above to answer the following

Solve the question in details as we took in class and then answer the questions

  1. What is the carrying value for the investment in associate (Alton) on 31 December 2009?
  2. What is the FV of the previously held 30% interest in Alton on 1 January 2010?

  1. What is the gain/loss on re-measuring the previously held 30% interest in Alton on 1 January 2010?
  2. What is the goodwill recognized on the date Hornet gained control over Alton?
Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. carrying value of the investment

30% of the fair value of the assets 1.8
profit for 2019 (2*30%) 0.6
Less dividend paid (1*30%) 0.3
Investment in associate value as of 31st dec 2009 2.7

2.  FV of the previously held 30% interest in Alton on 1 January 2010

30% of the fair value of the assets as of 1s Jan 2010 (8*30%) 2.4
profit for 2019 (2*30%) 0.6
Less dividend paid (1*30%) 0.3
Investment in associate value as of 31st dec 2009 3.3

3. Gain on re-measuring the previously held 30% interest in Alton on 1 January 2010 = 3.3-2.7 = $0.6M

4. Good will value after gained further 60% stake -

Value of goodwill after gained control
Assets net value 8
less - cash paid (2+6) 8
less NCI interest (8*10%) 0.8
Goodwill 0.8
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Bourne, Inc. acquired 50% of David Webb Enterprises for $5,000,000 on January 1, 2018. The total...
Bourne, Inc. acquired 50% of David Webb Enterprises for $5,000,000 on January 1, 2018. The total fair value and book value of Webb’s identifiable net assets was $8,000,000 on that date. During 2018 Webb recognized net income of $1,000,000 and paid dividends of $1,200,000. Webb had a fair value of $11,000,000 as of December 31, 2018. Required: Determine the amounts that will be associated with the Investment in Webb account and the Goodwill calculated upon the purchase of Webb’s stock,...
Bourne, Inc. acquired 50% of David Webb Enterprises for $5,000,000 on January 1, 2018. The total...
Bourne, Inc. acquired 50% of David Webb Enterprises for $5,000,000 on January 1, 2018. The total fair value and book value of Webb’s identifiable net assets was $8,000,000 on that date. During 2018 Webb recognized net income of $1,000,000 and paid dividends of $1,200,000. Webb had a fair value of $11,000,000 as of December 31, 20 Required: Determine the amounts that will be associated with the Investment in Webb account and the Goodwill calculated upon the purchase of Webb’s stock,...
Cullumber Corporation acquired End-of-the-World Products on January 1, 2020 for $6450000, and recorded goodwill of $1210000...
Cullumber Corporation acquired End-of-the-World Products on January 1, 2020 for $6450000, and recorded goodwill of $1210000 as a result of that purchase. At December 31, 2021, the End-of-the-World Products Division had a fair value of $4789000. The net identifiable assets of the Division (including goodwill) had a carrying value of $5490000 at that time. What amount of loss on impairment of goodwill should Cullumber record in 2021? $960000 $1661000 $0 $701000
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent...
Goodwill, Equity Method, Eliminating Entries, First Year On January 1, 2020, Playtel Inc. acquired 75 percent of the stock of San Jose Cable for $200 million in cash. At the date of acquisition, the fair value of the noncontrolling interest was $50 million, and Playtel’s shareholders’ equity accounts were as follows (in thousands): Common stock, $1 par $5,000 Additional paid-in capital 25,000 Retained deficit (1,000) Treasury stock (800) Total $28,200 Both companies have a December 31 year-end. At the date...
Dok Company acquired a 30 percent interest in Oak Company on January 1 for $1,000,000. Assume...
Dok Company acquired a 30 percent interest in Oak Company on January 1 for $1,000,000. Assume the cost of the investment equals the fair value of Oak’s net assets. Dok assigned the $250,000 excess of fair value over book value of the interest acquired to the following assets:                         Inventories                                          $ 50,000 (sold in the current year)                         Building                                               $100,000 (4-year remaining life at January 1)                        Goodwill                                              $100,000 During the year Oak reported net income...
Problem1: On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This...
Problem1: On January 1, 2009, Vacker Co. acquired 70% of Carper Inc. by paying $650,000. This included a $20,000 control premium. Carper reported common stock on that date of $420,000 with retained earnings of $252,000. A building was undervalued in the company's financial records by $28,000. This building had a ten-year remaining life. Copyrights of $80,000 were to be recognized and amortized over 20 years. Carper earned income and paid cash dividends as follows: NI Div Paid 2009 $105,000 $54,600...
Pratt Company acquired all of the voting stock of Swank Company on January 1, 2016 for...
Pratt Company acquired all of the voting stock of Swank Company on January 1, 2016 for $60,000. Swank Company’s book value at the date of acquisition totaled $8,000. Swank had previously unrecorded identifiable intangibles with a total fair value of $20,000, and plant assets were overvalued by $15,000. All of Swank’s other identifiable net assets had book values that approximated fair value at the date of acquisition. Goodwill arising from this acquisition equaled $47,000. The identifiable intangibles have an estimated...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000 Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition? $0 $150,000 $180,000 $300,000 Assume that Identifiable net...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C...
On August 1, Year 5, A Company acquired 70 Percent of the common shares of C Company for $700,000. On that date, the fair value of C’s identifiable net assets was $600,000 and the book value of its shareholders’ equity was $500,000 Assume that fair value enterprise method will be used for valuation of subsidiary. What amount of non-controlling interest should be reported on the balance sheet on the date of acquisition? $0 $150,000 $180,000 $300,000 Assume that Identifiable net...
On January 1, 20X1, Honey Bee Corporation purchased the net assets of Green Hornet Company for...
On January 1, 20X1, Honey Bee Corporation purchased the net assets of Green Hornet Company for $1,500,000. On this date, a condensed balance sheet for Green Hornet showed: Book Fair Value Value Current Assets $ 500,000 $800,000 Long-Term Investments in Securities 200,000 150,000 Land 100,000 600,000 Buildings (net) 700,000 900,000 $1,500,000 Current Liabilities $ 300,000 $300,000 Long-Term Debt 550,000 600,000 Common Stock (no-par) 300,000 Retained Earnings 350,000 $1,500,000 Required: Record the entry on Honey Bee's books for the acquisition of...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT