Jiminez Limited acquired 80% of the share capital and reserves of Mustang Limited for $180 000.Share capital was $100 000 and reserves amounted to $50 000.All assets and liabilities were recorded at fair value except buildings which was recorded at $10 000 below fair value.If the company tax rate was 30%,and the partial goodwill method was adopted,the NCI share of equity at the date of acquisition was:
A)$30 000
B)$31 400
C)$32 000
D)$36 000.

Question

Quizplus · Accepted Answer

To calculate the NCI share of equity, we need to first calculate the total assets and liabilities after the acquisition.

Total assets = $100,000 + ($50,000 - $10,000) x 1.8 = $122,000

Total liabilities = $0

Total equity = $122,000

NCI share of equity = (1 - 0.8) x $122,000 = $24,400

However, since partial goodwill method is adopted, the NCI share of equity needs to be adjusted for the excess cost of acquisition.

Excess cost of acquisition = 80% x $10,000 = $8,000

Adjusted NCI share of equity = $24,400 - $8,000 x (1 - 30%) = $31,400

Therefore, the correct answer is B.

Jiminez Limited Acquired 80% of the Share Capital and Reserves