On September 1,20X7,CanAir Limited decided to buy 100% of the shares outstanding of SkyAir Inc.for $1,215,000.Can Air will pay for this acquisition by cashing in all of its marketable securities and issuing share capital for the remaining amount.The balances showing on the statement of financial position for the two companies at August 31,20X7 are as follows:

After a review of the financial assets and liabilities,CanAir determines that some of the assets of SkyAir have fair values different from their carrying values.These items are listed below:
Capital assets - fair value is $1,350,000
Internet domain name - fair value is $55,000
Customer lists - fair value is $35,000
In addition,SkyAir has tax losses available for carryforward that have a fair value of $225,000 and it is probable that they will be realized in the future.
Required:
Determine the amount of goodwill that will be recorded on the business combination.
Prepare the consolidated statement of financial position as at September 1,20X7.

Question

On September 1,20X7,CanAir Limited decided to buy 100% of the shares outstanding of SkyAir Inc.for $1,215,000.Can Air will pay for this acquisition by cashing in all of its marketable securities and issuing share capital for the remaining amount.The balances showing on the statement of financial position for the two companies at August 31,20X7 are as follows:
  
After a review of the financial assets and liabilities,CanAir determines that some of the assets of SkyAir have fair values different from their carrying values.These items are listed below:
Capital assets - fair value is $1,350,000
Internet domain name - fair value is $55,000
Customer lists - fair value is $35,000
In addition,SkyAir has tax losses available for carryforward that have a fair value of $225,000 and it is probable that they will be realized in the future.
Required:
Determine the amount of goodwill that will be recorded on the business combination.
Prepare the consolidated statement of financial position as at September 1,20X7.

Quizplus · Accepted Answer

The Answer is Calculation of goodwill: Calculation of goodwill: Consideration received: Fair value of net assets acquired: *Note: The purchase price of $1,215,000 is paid with cash from the marketable securities of $480,000 and an issue of shares totalling $735,000.

Calculation of goodwill: Consideration received: Fair value of net assets acquired: *Note: The purchase price of $1,215,000 is paid with cash from the marketable securities of $480,000 and an issue of shares totalling $735,000.

Consideration received:
Fair value of net assets acquired: Calculation of goodwill: Consideration received: Fair value of net assets acquired: *Note: The purchase price of $1,215,000 is paid with cash from the marketable securities of $480,000 and an issue of shares totalling $735,000.

*Note: The purchase price of $1,215,000 is paid with cash from the marketable securities of $480,000 and an issue of shares totalling $735,000.

On September 1,20X7,CanAir Limited Decided to Buy 100% of the Shares