Company X purchased 22,500 shares of Company Y and 6,000 shares of Company Z on 1st April 2016. Details of the purchase consideration given at the date of purchase are:

Investment in Company Y

A share exchange of 2 shares in X for every 3 shares in Y plus an issue to the shareholders of Y of 10% loan notes on the basis of $80 loan note for every 300 shares held in Y. The loan is redeemable at par on 30thJune 2016. Interest expense for the period to 30th September 2016 has been included in the financial statements of X.

Investment in Company Z

A share exchange of 3 shares in X for every 4 shares in Z plus $1 per share acquired in cash. The market price of X's shares at 1stApril 2016 was $6 per share. The summarized statements of profit or loss for the three companies for the year to 30th September 2016 are:

Company X Company Y Company Z

$'000 $'000 $'000

Revenue 225 122.1 93

Cost of sales (142.2) (59.1) (45.9)

Gross profit 82.8 63 47.1

Operating expenses (31.44) (27) (29.1)

Operating profit 51.36 36 18

Interest expense (0.51) - -

Profit before tax 50.85 36 18

Income tax expense (14.40) (9) (6)

Profit for the year 36.45 27 12

The following additional information below is relevant:

i) The details of each company's share capital and reserves at 1 October 2015 are:

Company X Company Y Company Z

$'000 $'000 $'000

Equity shares of K1 each 60 30 15

Share premium 15 12 6

Retained earnings 54 22.5 18

ii) A fair value exercise was carried out for Y at the date of acquisition which revealed that its land had a carrying amount less than its fair value by $9,000 while its plant had a fair value more than its carrying amount by $15,000. The increase in fair value of plant would make additional depreciation of $1,500 in the post-acquisition period in the consolidated financial statements to 30th September 2016. The fair values have not yet been reflected in Y's financial statements. Depreciation of plant is charged to cost of sales.

iii. Prior to its acquisition, Y had been a good customer of X. In the post-acquisition period, X sold goods to Y amounting to $30,000. X

made a profit of $12,000 on these sales. Half of these goods were still in the inventory of Y at 30th September 2016.

iv. An impairment test on the Goodwill of Y conducted on 30th September 2016 concluded that it should be written down by $22, 500. The value of the investment in Z was not impaired.

v. X paid a dividend of K20 000 on 20th September 2016. Y and Z did not make any dividend payments.

vi. It is group policy to value non- controlling interest at acquisition at its fair value which directors determined to be $29,000

vii. All items in the above statements of profit or loss are deemed to accrue evenly over the year.

QUESTION

a. Calculate the Goodwill arising on purchase of shares in Company Y and the carrying value of Z at 1^st April 2016