On 1 1 2020 V Ltd acquired 90 of share capital of G Ltd V Ltd issued 2 new shares for every 3 shares of G Ltd acquired, when the market value of the share of V Ltd was $6 and the market value of the share of G Ltd was $3 On 31 12 2020, V Ltd will pay $1 75 per share acquired to shareholders of G Ltd Cost of capital is 10 per annum Statement of profit or loss for the year ended 30 09 2020 V Ltd G Ltd $000 $000 Revenue 65000 40000 Cost of sales 50000 25000 Gross profit 15000 15000 Distribution costs 2000 2000 Administrative expenses 4000 3000 Investment income 500 Finance cost 500 PBT 9000 10000 Taxation 3000 2000 Profit for the year 6000 8000 Equity 1 10 2019 Equity shares $1 each 30000 10000 Retained earnings 55000 35000 Notes At the date of acquisition, the fair value of G Ltd assets was equal to their carrying amounts with 2 exemptions (the fair value changes of which has not been incorporated into the financial statements of G Ltd) An item of plant had a fair value of 2 million above its carrying amount, its remaining life was 3 years and depreciation is charged to cost of sales G Ltd had a contingent liability which V Ltd estimated to have a fair value of $500000 which did not change as at 30 09 2020 V Ltd values NCI at fair value at acquisition date by using the market value of G Ltd shares at that date which is representative of the fair value of the shares held by NCI Sales from V Ltd to G Ltd during the year ended 30 09 2020 were 750000 per month at a mark up of 20 on cost G Ltd had $1 5 million of these goods in stock at 30 09 2020 V Ltd investment income is a dividend received from investment in a 40 owned associate, held for few years, the profit of which was $2 million for the year ended 30 09 2020 Although G Ltd was profitable since the acquisition by V Ltd, the market for G Ltd products was hit in recent months and V Ltd calculated that goodwill was impaired by $2 million as at 30 09 2020 Required Calculate goodwill arising on acquisition of G Ltd Prepare consolidated statement of profit or loss for V Ltd for the year ended 30 09 2020

Question

On 1 1 2020 V Ltd acquired 90  of share capital of G Ltd  V Ltd issued 2 new shares for every 3 shares of G Ltd acquired, when the market value of the share of V Ltd was $6 and the market value of the share of G Ltd was $3  On 31 12 2020, V Ltd will pay $1 75 per share acquired to shareholders of G Ltd  Cost of capital is 10  per annum  Statement of profit or loss for the year ended 30 09 2020 V Ltd G Ltd $000 $000 Revenue 65000 40000 Cost of sales 50000 25000 Gross profit 15000 15000 Distribution costs 2000 2000 Administrative expenses 4000 3000 Investment income 500   Finance cost 500   PBT 9000 10000 Taxation 3000 2000 Profit for the year 6000 8000 Equity 1 10 2019 Equity shares $1 each 30000 10000 Retained earnings 55000 35000 Notes At the date of acquisition, the fair value of G Ltd assets was equal to their carrying amounts with 2 exemptions (the fair value changes of which has not been incorporated into the financial statements of G Ltd)  An item of plant had a fair value of 2 million above its carrying amount, its remaining life was 3 years and depreciation is charged to cost of sales G Ltd had a contingent liability which V Ltd estimated to have a fair value of $500000 which did not change as at 30 09 2020 V Ltd values NCI at fair value at acquisition date by using the market value of G Ltd shares at that date which is representative of the fair value of the shares held by NCI Sales from V Ltd to G Ltd during the year ended 30 09 2020 were 750000 per month at a mark up of 20  on cost  G Ltd had $1 5 million of these goods in stock at 30 09 2020 V Ltd investment income is a dividend received from investment in a 40  owned associate, held for few years, the profit of which was $2 million for the year ended 30 09 2020  Although G Ltd was profitable since the acquisition by V Ltd, the market for G Ltd products was hit in recent months and V Ltd calculated that goodwill was impaired by $2 million as at 30 09 2020 Required Calculate goodwill arising on acquisition of G Ltd Prepare consolidated statement of profit or loss for V Ltd for the year ended 30 09 2020

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On 1.1.2020 V Ltd acquired 90% of share capital of G Ltd. V Ltd issued 2 new shares for every 3 shares of G Ltd

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