Good will on consolidation-consolidated balance sheet, Financial Accounting

Assignment Help:

Good will on consolidation

Good will on consolidation arises when the purchase consideration paid by the holding company is different from the value of the net assets acquired in the subsidiary company.

If purchase consideration is more than net assets acquired, then the difference is positive goodwill and if purchase considered is less than net assets acquired, then the difference is negative goodwill.

Goodwill will thus be computed in the following  two ways:

 Method 1

 

 

£

£

Cost of investment in subsidiary

 

xx

less:

 

 

Ordinary share capital of subsidiary

x

 

Capital reserves or date of acquisition

x

 

Revenue reserves (retained profits) on date of acquisition

x

 

Shareholders funds on date of acquisition

xx

 

Holding company shares acquired

 

(x)

GOODWILL POSITIVE/NEGATIVE

 

xx

 

 

Method 2

 

 

£

Cost of investment in subsidiary

xx

Less:  share of net assets acquired (on date of acquisition)

(x)

 

xx/(xx)


NOTE: Total assets less total liabilities i.e. net assets is the  same as shareholders funds. The most common approach used in computing goodwill is by preparing an account called cost of control whereby the cost of investment is posted on the debit side and the holding company share of the ordinary share capital, capital reserves and revenue reserves on the date of acquisition in the subsidiary company are posted on the credit side. The balancing figure in that account is goodwill.


Related Discussions:- Good will on consolidation-consolidated balance sheet

After all events have been recorded, After all events have been recorded, L...

After all events have been recorded, Lang's obligations to creditors represents what percent of total assets? a).record the events under an accounting equation b. After all e

Case study, It is the month of april for rand company a producer of gold an...

It is the month of april for rand company a producer of gold and silver commemorative medallions. Rand company has one job, job A a special minting of 1000 gold medallions which st

Lease or buy, La Favorite Pastry Shop has been in business since 1985 and s...

La Favorite Pastry Shop has been in business since 1985 and started with a large commercial oven that was built in 1955. Max, the owner is debating whether or not to purchase a new

Case study, I need help with a mini accounting project. Here is a link to t...

I need help with a mini accounting project. Here is a link to the questions I need to be answered. Read the questions and instructions and if you think you can complete the case wi

Prepare general journal entries, Assessment Criteria: Student work will ...

Assessment Criteria: Student work will generally be assessed in terms of the following criteria: 1. Preparation of correct journal entries. 2. Accumulation of journal entr

How to determine the financial reports of businesses, How to Determine the ...

How to Determine the financial reports of businesses In response to criticisms that financial reports of some businesses aren't clear enough to users, accounting rule makers ha

Calculate the net present value of the investment, Calculate the Net Presen...

Calculate the Net Present Value of the Investment XYZ Ltd is a manufacturer of household goods located in Ang Mo Ko. They presently make and wholesale fruit juicers, blenders

A valid will-executorship laws and accounts, A Valid Will A will may be...

A Valid Will A will may be made: Orally; it will not be valid unless: 1. It is made before two or more competent witnesses (i.e. persons of sound mind and full age); and 2.

our assumptions about consumer behavior, 5.    A stockholder named Sue mus...

5.    A stockholder named Sue must cast a vote for chair of the board. Sue prefers Mr. Lee to Ms. Doe, Ms. Doe to Mr. James, and Mr. James to Mr. Lee. a. Are Sue's preferences c

Consolidated income statement and consolidated statement , CONSOLIDATED INC...

CONSOLIDATED INCOME STATEMENT AND CONSOLIDATED STATEMENT OF CHANGES IN EQUITY     The consolidated income statement follows similar principles as those of the consolidated balanc

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