Determine the goodwill calculation, Financial Accounting

Assignment Help:

 A company purchased 16 million shares (representing an 80% controlling interest) in another company on 1 July 2010. The terms of the purchase were as follows:   

  • 1 share in the parent for every 4 shares in the subsidiary
  • An immediate cash payment of $20.5 million
  • A payment of 50% of the company's average annual profit for the first two years to be settled three years after the acquisition date. On 1 July 2010, the expected value of this payment (excluding any adjustment for the time value of money) was $10.2 million

The subsidiary's shares were trading at $20.40 at the date of acquisition. The parent's shares were trading at $15.20.

As a result of additional information available since the acquisition, the expected value of the payment based on profit (excluding adjustment for the time value of money) was revised to $11.4 million at 31 December 2010.

An appropriate annual discount factor for this company to use where necessary is 8%.

Requirement

Determine the consideration transferred figure used in the goodwill calculation for inclusion in the consolidated financial statements for the year ended 31 December 2010.

1(m) On 1 December 2009, Panther, a public company acquired 70% of the ordinary share capital of Sabre, a private company. The functional currency of Panther is the $ and the functional currency of Sabre is the zet.

Panther paid $46 million for its investment in Sabre on 1 December 2009, when the net fair value of the identifiable assets acquired and liabilities assumed of Sabre were 26,400 million zets.

Given that Sabre is a private company, Panther decided to measure the non-controlling interests at acquisition at the proportionate share of the fair value of the identifiable net assets of Sabre.

An impairment test conducted at group level on the investment in Sabre at 31 December 2010 indicated impairment losses of 600 million zets (gross of non-controlling interests). No impairment loss adjustments had been necessary at the previous year end.

Relevant exchange rates were:

1 December 2009 $1 = 470 zets

31 December 2009 $1 = 478 zets

31 December 2010 $1 = 490 zets


Related Discussions:- Determine the goodwill calculation

Estimate a linear joint demand curve, Pinapple Inc. is deciding how to pric...

Pinapple Inc. is deciding how to price its two lines of laptops, one of which is a light one for travel (which is called Light) and the other is a powerful one (called Power). Thes

Example of sinking fund factor, How much must you save annually in order to...

How much must you save annually in order to accumulate Rs. 20, 00,000 by the ending of 10 years, whether the saving earns an interest of 12%?             Solution : A = [k/(

Non-financial factors for non-financial considerations, Q. Non-financial fa...

Q. Non-financial factors for non-financial considerations? There are several non-financial factors which possibly relevant to a decision to contract out and the type of factors

Estimate the montly sales budget, Your friend Peter is planning to set up a...

Your friend Peter is planning to set up a new business which will manufacture and sell wooden tables. The parts that make up the table consist of a wooden table top measuring 1m by

Prepare a cash budget, The following information for the six months ended ...

The following information for the six months ended 31 December 2009 relates to the business of Mr N Morris: a) Opening cash (including bank) balance Rs 1,200 b) Productio

Enter into accounts, Common stock $5 stated value (900,000 shares authorize...

Common stock $5 stated value (900,000 shares authorized, 620,000 shares issued)................. $3,100,000 Paid-in capital in excess o stated value-common stock ....1,240,000 Reta

Bond that matures in 12 years, You just purchased a bond that matures in 12...

You just purchased a bond that matures in 12 years. The bond has a face value of $1,000 and has an 7% yearly coupon. The bond has a present yield of 5.74%. What is the bond's yield

Prepare a direct materials purchases budget, Question: Mosman Ltd produ...

Question: Mosman Ltd produces a single product. The projected sales for the first month of the coming year and the beginning and ending inventory data are as follows:

Which actions are most likely to directly increase cash, Which of the follo...

Which of the following actions are most likely to directly increase cash as shown on a firm's balance sheet? Explain and state the assumptions that underlie your answer. 1. It i

Merchandising, A company that uses the perpetual inventory system purchased...

A company that uses the perpetual inventory system purchased $8,500 worth of inventory on September 25. Terms of the purchase were 2/10, n/30. The invoice was paid in full on Octob

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd