FA Section B · 15 marks · Suggested: 18 min

Goodwill and non-controlling interest (Plover Group)

Questions are in English, the exam language. Companies and figures are fictional and used for practice.

On 1 January 20X5 Plover Co acquired 80% of the equity shares of Sandpiper Co for $500,000 in cash.

At that date Sandpiper's share capital was $200,000 and its retained earnings were $150,000. The fair value of Sandpiper's land was $50,000 higher than its carrying amount. No other fair value adjustments were needed.

The non-controlling interest (NCI) is measured at fair value, which was $110,000 at the acquisition date. Goodwill has not been impaired.

At 31 December 20X5	Plover Co	Sandpiper Co
Retained earnings	$600,000	$210,000

(a) What were Sandpiper's net assets at fair value at the date of acquisition ($)?2 marks
(b) Calculate the goodwill arising on acquisition ($).3 marks
(c) What is the non-controlling interest in the consolidated statement of financial position at 31 December 20X5 ($)?3 marks
(d) What are consolidated retained earnings at 31 December 20X5 ($)?3 marks
(e) Measuring the NCI at fair value at the acquisition date is known as:2 marks
Measuring the NCI at fair value at the acquisition date is known as:The cost methodThe full goodwill methodThe proportionate share methodThe equity method
(f) How is Plover's investment in Sandpiper shown in the consolidated statement of financial position?2 marks
How is Plover's investment in Sandpiper shown in the consolidated statement of financial position?It is replaced by Sandpiper's assets and liabilities, goodwill and the NCIIt is shown as a non-current asset at costIt is shown at fair value through profit or lossIt is deducted from equity

15 marks