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Wiley lFRS: Practicallmplementation Guide and Workbook
should be placed on the purchase consideration and
net assets of Coa l as at the date of acquisition?
(a) Purchase consideration $10 million, net as–
set value $7 million.
(b) Purchase consideration $ 11 million, net as–
set value $7.5 million.
(c) Purchase consideration $9 million, net asset
value $7.5 million.
(d) Purchase consideration $11 million, net as-
set value $7 million.
Answer: (b)
15. Mask, a private limited company, has arranged
for Man, a public limited company, to acquire it as a
means of obtaining a stock exchange listing. Man
issues
15
million shares to acquire the whole of the
share capital of Mask (6 million shares). The fair
value of the net assets of Mask and Man are $30 mil–
lion and $18 million respectively. The fair value of
each of the shares of Mask is $6 and the quoted mar–
ket price of Man' s shares is $2. The share capital of
Man is 25 million shares after the acquisition. Calcu–
late the value of goodwill in the above acquisition.
(a) $ 16 million.
(b) $ 12 million .
(c) $10 million.
(d) $6 million.
Answer: (d)
Cost of acquisition (Mask's shareholders own 60%
of equity of Man)
In order for 40 % of Mask's shar es to be owned by
shareholders of Man, Mask needs to issue 4 million
sha res. Therefore, cost of acquisition is
4 million x $6 each
Fair value of assets of
Man
Goodwill
$24 million
($18 million)
$6 million