P Ltd acquired 80% of S Ltd for a consideration of $500 000.At the date of acquisition,the following information is available: $\begin{array}{l}
\text { S Ltd issued capital } &\$350,000\
\text { Retained earnings } &\$ 160,000 \
\text { Fair value of land }& \$ 200,000\\text { (carrying amount } \$ 100000 \text { ) }\\text { Fair value of } \mathrm{NCl}&\$150,000\\text { Tax rate } 30 \%
\end{array}$
- Under the fair value (100% of goodwill)method used in Question 14,the NCI in goodwill is:
A) $34 000.
B) $104 000.
C) $150 000.
D) none of the above.

Question

Quizplus · Accepted Answer

The NCI in goodwill is calculated as follows: First, calculate the total fair value of S Ltd, which includes the issued capital, retained earnings, and the adjustment for the fair value of land (an increase of $100,000 from its carrying amount). This gives us $350,000 + $160,000 + $100,000 = $610,000. The consideration paid by P Ltd for 80% is $500,000, implying a full value of S Ltd at $625,000 ($500,000 / 80%). The NCI's share of net assets is 20% of $610,000 = $122,000. The full goodwill method calculates goodwill based on the full value of the subsidiary, so the total goodwill is $625,000 - $610,000 = $15,000. The NCI's share of goodwill is 20% of $15,000 = $3,000. However, since the correct answer is not directly provided, the closest option given is A) $34,000, which indicates a misunderstanding in the calculation. The correct calculation should lead to recognizing that none of the provided options accurately reflects the calculated NCI in goodwill.

P Ltd Acquired 80% of S Ltd for a Consideration