In the question 91, we have:
Valley acquires 45% ownershipstake of Southwest which costs 9m, paid in cash.
Valley assets: 96m, equity: 80m
Southwest assets: 32, equity : 16m
Using acquisition method, calculate the total asseta of Valey after acquisition.
The answer is : 96+32-9=119m.
I found there are goodwill because 45% of 16m is only 7.2m but Valley pays 9m.
The question doesnt precise which method of acquisition (full or partial). And in my opinion, the right answer must be:
With full method: 96+32-9+4 = 123m (goowill equal 4m)
With partial method: 96+32-9+1.8 = 120.8m (goodwill equal 1.8m)
What do you think about my solution?
na_27
May 25, 2017, 7:14pm
#2
I took a look at the question. Goodwill is not a current asset. The question asks for current asset total.
Yes. The question demand what is the total assets.
But the total asset is different in function of which method applied. Total asset is higher in full goodwill methods than in partial method.
Do you know the answer of schweser uses full (or partial) method?
This formula is only applicable in case of no goodwill.
People who took already this mock, could you confirm whether the solution is correct?
mkipa1
May 25, 2017, 10:55pm
#5
The solution provided is correct. The questios specifically asks for current assets. Goodwill is not a current asset and as such, would not have to be accounted for.
Cheers.
Ah yes, the question asks current assets :).
Thank you all.