Question 2

Hornet plc acquired 60% of the equity share capital of Alton on 1 January 2009 for a cash consideration of $ 4.5 M. The fair value of net assets of Alton at this date was $6 and full goodwill method is used. During 2009 until 31 December 2009 Alton made a net income of $2. On 1 January 2010, Hornet acquired an additional 30% of equity of Alton for $ 2M. On 1 January 2010, identifiable net assets of Alton were included in the consolidated statement of financial position at $ 8M.

Use the above to answer the following 1.What is the goodwill recognized on 1 January 2009?

2.What is the worksheet journal entry to record the effect of the 30% additional purchase of shares on 1 January 2010?

3.What is the value of goodwill following the purchase of the additional 30% shares on 1 January 2010?

4.What is the amount of gain or loss recognized following the purchase of the additional 30% shares on 1 January 2010 and why?