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Goodwill on consolidation computation

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Sunreel Co purchased 80% stake in Codfish Inc on 1st January, 20x0. The purchase amount involved cash of $500,000 with an additional amount, of $40,000 to be paid a year later. As at that date CodFish's share capital is $400,000 with retained earnings of $10,000.

Excess cash can be invested at 8% as at 1st January 20x0.

Calculate the goodwill purchased by Sunreel Co

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Solution Summary

The solution set deals with computing the goodwill earned on a business consolidation.

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Goodwill represents the excess of the purchase consideration over the net assets as at the time of purchase. From the ...

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Chidi Ngene, M. Sc.
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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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