Alpha plc paid 900,000 to acquire the whole of the equity in Beta plc on 31 December
Question:
Alpha plc paid £900,000 to acquire the whole of the equity in Beta plc on 31 December 2011, when the net assets of Beta plc were reported as shown. As at the date of acquisition:
(a) Beta plc reports at £80,000 development costs which fail to meet the capitalisation criteria of the Alpha group.
(b) Certain brand names owned by Beta, but not reported in their books, are, in the opinion of Alpha’s directors, worth £90,000 and are expected to have a useful life of ten more years.
(c) The staff with Beta are in possession of knowledge of certain manufacturing processes which could be exploited to good advantage for generating substantial profit. Prior to acquisition, the directors of Alpha were willing to pay £100,000 to acquire that knowledge.
Required:
Identify the amount Alpha paid to acquire the goodwill in Beta, explaining your treatment of items stated as (a), (b) and (c).
Step by Step Answer:
Financial Accounting An Introduction
ISBN: 9780273737650
2nd Edition
Authors: Mr Barry Elliott, Mr Augustine Benedict