CIMA Exam CIMAPRA19-F02-1 Topic 1 Question 93 Discussion

Actual exam question for CIMA's CIMAPRA19-F02-1 exam

Question #: 93
Topic #: 1

ST acquired 75% of the 2 million $1 equity shares of CD on 1 January 20X3, when the retained earnings of CD were S3,550,000. CD has no other reserves.

ST paid $5,600,000 for the shares in CD and the non controlling interest was measured at its fair value of S1,400,000 at acquisition.

At 1 January 20X3, the fair value of CD's net assets were equal to their carrying amount, with the exception of a building. This building had a fair value of $1,000,000 in excess of its carrying amount and a remaining useful life of 25 years on 1 January 20X3.

At 31 December 20X5, the retained earnings of ST and CD were $8,500,000 and $5,250,000 respectively.

What is the value of goodwill to be included in the consolidated statement of financial position of ST as at 31 December 20X5?

A$450,000

B$1,450,000

C$950,000

D$570,000

Show Suggested Answer

Suggested Answer: A

by Isadora at Jul 12, 2024, 02:41 PM

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Annelle

2 months ago

This question is a real head-scratcher, but I think I've got it figured out. The answer is B, and I'm as surprised as anyone! I guess I'm just a natural at this accounting stuff. Or maybe I'm just really good at guessing. Either way, I'm feeling pretty confident about this one.

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Micaela

20 days ago

Yeah, it's all about understanding the fair value of the net assets.

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Tiffiny

24 days ago

That makes sense, the goodwill calculation can be tricky.

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Hollis

1 months ago

I think the answer is B) $1,450,000.

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Regenia

2 months ago

Hmm, this question is really making me scratxh my head. Let me think this through... Okay, I've got it! The answer is A. The excess fair value of the building is $1,000,000, and ST acquired 75% of CD, so the goodwill should be $450,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Antonette

2 months ago

This is a tricky one, but I believe the answer is D. The question states that the fair value of CD's net assets was equal to their carrying amount, except for the building. The building had a fair value of $1,000,000 in excess of its carrying amount, and ST acquired 75% of CD, so the goodwill should be $570,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Aliza

10 days ago

I agree with you, the answer is D) $570,000.

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Lamonica

17 days ago

Actually, I think it's C) $950,000.

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Gracie

1 months ago

I believe it's B) $1,450,000.

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Tamekia

2 months ago

I think the answer is A) $450,000.

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Dannette

2 months ago

But the fair value of the building in excess of its carrying amount should be considered in calculating goodwill.

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Alton

2 months ago

I'm not sure about this one. The question seems a bit confusing, but I think the answer is C. The excess fair value of the building is $1,000,000, and ST acquired 75% of CD, so the goodwill should be $950,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Thurman

1 months ago

User 2

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Adelle

2 months ago

User 1

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Annabelle

2 months ago

I disagree, I believe the answer is C) $950,000.

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Solange

2 months ago

I think the answer is B. The question states that ST paid $5,600,000 for the shares in CD, and the non-controlling interest was measured at $1,400,000. The fair value of CD's net assets, excluding the building, was equal to their carrying amount. The building had a fair value of $1,000,000 in excess of its carrying amount, so the total fair value of CD's net assets was $1,000,000 more than their carrying amount. Since ST acquired 75% of CD, the goodwill should be $1,450,000 (($5,600,000 + $1,400,000) - (2,000,000 * $0.75 * $1 + $1,000,000)).

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Dannette

3 months ago

I think the answer is B) $1,450,000.

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