Question

On 1 March 2016 Sunshine Ltd acquired 80% of the issued share capital of Macbeth Ltd...

On 1 March 2016 Sunshine Ltd acquired 80% of the issued share capital of Macbeth Ltd for consideration of £444,000. The following information has been extracted from the statement of financial position of Macbeth Ltd on the date of acquisition:

Share capital Share Premium Retained profits

£ 200,000

80,000 74,000

The following information is available:

  1. (1) Included in Macbeth Ltd’s statement of financial position on the date of acquisition was land at cost of £35,000. Land is not depreciable. The fair value of the land on 1 March 2016 was estimated to be £40,000.

  2. (2) The retained profits of Macbeth Ltd at 31 December 2019 were £120,000.

  3. (3) At the end of 2019 directors estimated that goodwill had been impaired by £6,800. Share capital and share premium of Macbeth Ltd have remained the same since the date of acquisition.

REQUIRED:

Calculate Goodwill and Non-Controlling Interest to be included in the consolidated statement of financial position of Sunshine Ltd at 31 December 2019.

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Answer #1

Date of acquisition of 80% Macbeth ltd by sunshine ltd,: 1March,2019.

Purchase consideration= £444000

Calculation of identifiable net assets acquired:

200000+80000+74000+5k=£359k

Calculation of non controlling interest based on protonated basis in net assets:

£359k*0.2= £71.8k

Calculation of good will

Consideration=£ 444k

Add:NCI = £71.8k

less: identifiable net assets= (£359k)

Goodwill= £156.8

Particular DOA Change Date of consolidation
Share capital and share premium 280000

-

 280000
Retained profit 74000 46000 120000

Sunshine's share of profits@80%= £36800

Non controlling interest share in profits= £9200

Goodwill after impairment will be : £156800-6800= £150000 to be recognised in consolidated financial statements on 31dec,2019

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