Mango Limited purchased the following equity investments

On 1 October 2019,: 70% of the issued share capital of Lemon . The acquisition was through a share exchange of three shares in Mango Limited for every five shares in Lemon Limited. The market price of Mango Limited's shares at 1 October 2019 was N$5 per share.

On 1 April 2020: 4.5 million shares in Guava Limited paying N$6 per share in cash and issuing to Guava's shareholders 10% ( actual and effective rate) loan notes on the basis of N$100 loan note for every 100 shares acquired.

The summarised statements of comprehensive income for the three companies for the year ended 30 September 2020 are:

Mango Lemon Guava.

N$m N$m N$m

Revenue 105 62 50

Cost of sales (68 ) (36,5) (61)

Gross profit/(loss ) 37 25 .5 (11)

Other income (Note i) 0.4 Nil Nil

Distribution costs (4 ) (2 ) (4 .5)

Admin expenses (7. 5) (7 ) (8.5)

Finance costs (1.2) (0.9) (nil)

Profit/loss before tax 24. 7 15.6 (24 )

Income tax (8. 7) (2. 6) 4

Profit and loss 16 13 (20)

The following information is relevant:

(i) the other income is a dividend received from Lemon Limited on 31 March 2020.

(ii) the details of Lemon and Guava's share capital and reserves at 1 October 2019 were

Lemon Guava

N$m N$m

Equity shares of N$1 each 20 15

Retained earnings 18 35

(iii) The fair value exercise was carried out at the date of acquisition of Lemon Limited with the following results

Carrying Fair value

amount

N$m N$ m

Intellectual property 18 22

Land 17 20

Plant 30 35

The remaining useful life of Plant is 5 years and the intellectual property is still in development

The fair values have not been reflected in Lemon's financial statements

Plant depreciation is included in cost of sales

No fair values adjustments were required on the acquisition of the shares in Guava Limited.

(iv) In the year ended 30 September 2020, Mango sold goods to Lemon Limited as a selling price of N$ 18 million. Mango made a profit of cost plus 25% on these sales. N$7.5 million( at cost to Lemon) of these goods were still in the inventories of Lemon at 30 September 2020.

(v)Mango Limited's policy is to value the non-controlling interest using the proportionate share of the subsidiary 's identifiable net assets .

Impairment test for both Lemon and Guava were conducted on 30 September 2020. They concluded that the goodwill of sun lee should be written down by N$ 2 million and, due to its losses since acquisition, the investment in Guava was worth N$21.5 million.

(vi) All trading profits and losses are deemed to accrue evenly throughout the year.

Calculate the goodwill arising on the acquisition of Lemon Limited at 1 October 2019.