How do calculate goodwill from the following information the % of shares purchased, cash consideration, retained earnings and general reserve on the date of acquisition? Alicante plc acquired 60% of the shares in London plc on 1 November 2016 for acash consideration of £51,500,000. The balance on the retained earnings of Londonplc was £45,000,000 and the balance on the general reserve of London plc was£20,000,000 on that date.

Acquisition: It is acquiring by a company of majority shares of another company and by which the…

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How do calculate goodwill from the following information the % of shares purchased, cash consideration, retained earnings and general reserve on the date of acquisition?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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How do calculate goodwill from the following information the % of shares purchased, cash consideration, retained earnings and general reserve on the date of acquisition?

Alicante plc acquired 60% of the shares in London plc on 1 November 2016 for a
cash consideration of £51,500,000. The balance on the retained earnings of London
plc was £45,000,000 and the balance on the general reserve of London plc was
£20,000,000 on that date.

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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