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Laura Ltd purchased 97% of the issued shares of Chris Ltd for $1,759,000 on 1 July...

Laura Ltd purchased 97% of the issued shares of Chris Ltd for $1,759,000 on 1 July 2018 when the equity of Chris Ltd was as follows;

Share capital $703,600
Asset Revaluation surplus $527,700
Retained earnings $263,850
At this date, Chris Ltd had not recorded any goodwill, and all identifiable assets and liabilities were recorded at fair value except for the followings;

Account Cost Carrying Amount Fair value Further Life (Years)
Inventories $52,800 $58,100
Land $132,000 $145,000
Equipment $205,000 $164,000 $197,000 8
Chris Ltd identified at acquisition date a contingent liability related to a lawsuit where Chris Ltd was sued by a former supplier $21,000
Chris Ltd had unrecorded and internally generated Patent with the fair value of : $53,000
Chris Ltd had unrecorded and internally generated in-process research and development with the fair value of : $40,000

- 60% of inventory on hand at 1 July 2018 were sold by 20 June 2019.
- Further life of the assets is listed on the above table.
- Partial goodwill method is under use and the tax rate is 30%

Business   Accounting   
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Answer #1

Partial Goodwill

Purchase consideration 1759000

Fair value of identifiable net asset=(1639450)

NCI (472100*3%)= 14163

Goodwill= 133713

Goodwill = Consideration paid+ Fair value of non controlling interests + Fair value of equity interests - Fair value of net identifible assets

Consideration paid =1759000

Share capital $703,600
Asset Revaluation surplus $527,700
Retained earnings $263,850

total $1495150

Fair value of net assets=

Total value of assets=1495150

Less carrying amount of some assets 348800

Add fair value =58100+145000+197000+40000+53000-21000=472100

=1618450

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