Fisher Limited acquired 75% of the share capital and reserves of Man Limited for $150 000. The equity of Man Limited consisted of share capital of $100 000 and reserves of $60 000. All assets and liabilities were recorded at fair value except plant and equipment which were recorded at $10 000 below fair value. The company tax rate was 30%. The partial goodwill method is adopted by the group. The amount of goodwill acquired by Fisher Limited in this business combination was:
A) $17 000.
B) $24 750.
C) $30 000.
D) $112 500.

Question

Quizplus · Accepted Answer

Calculation of goodwill:
Fair value of net assets acquired = [$100 000 + $60 000 - ($10 000)] x 75% = $132 000
Consideration transferred = $150 000
Non-controlling interest = [$100 000 + $60 000 - ($10 000)] x 25% = $33 000
Goodwill = Consideration transferred - Fair value of net assets acquired - Non-controlling interest
= $150 000 - $132 000 - $33 000
= $24 750

Therefore, the amount of goodwill acquired by Fisher Limited in this business combination was $24,750.

Fisher Limited Acquired 75% of the Share Capital and Reserves