Little Ozzie Battlefield Equipment Ltd acquired 100% ownership of BigTrench plc for A$18 million on 1 July 20X4.At that date net fair value of the identifiable assets and liabilities of BigTrench plc were €10 million.The following exchange rates are given:
$\begin{array} { l l l l }
\text { 1 July 20X4 } & € 1.00 & = & \mathrm { A } \$ 1.60 \
\text { 30 June 20X5 } & € 1.00 & = & \mathrm { A } \$ 1.75 \
\text { 30 June 20X6 } & € 1.00 & = & \mathrm { A } \$ 1.50
\end{array}$
-At 30 June 20X5

Question

Little Ozzie Battlefield Equipment Ltd acquired 100% ownership of BigTrench plc for A$18 million on 1 July 20X4.At that date net fair value of the identifiable assets and liabilities of BigTrench plc were €10 million.The following exchange rates are given:
$\begin{array} { l l l l } 
\text { 1 July 20X4 } & € 1.00 & = & \mathrm { A } \$ 1.60 \
\text { 30 June 20X5 } & € 1.00 & = & \mathrm { A } \$ 1.75 \
\text { 30 June 20X6 } & € 1.00 & = & \mathrm { A } \$ 1.50
\end{array}$
-At 30 June 20X5

Quizplus · Accepted Answer

Goodwill is calculated as the purchase price minus the net fair value of identifiable assets and liabilities. In this case, A$18 million - (€10 million * A$1.60) = A$2 million. The goodwill in euros is €1.25 million, which translates to A$2,187,500 at the exchange rate of €1.00 = A$1.75 on 30 June 20X5.

Little Ozzie Battlefield Equipment Ltd Acquired 100% Ownership of BigTrench