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Calculate the goodwill if the cost of investment is 15,000, NCI at acquisition is 3,500, and the net asset of acquisition is $14,000.

Accounting

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Answer

000 = \mathbf{\4,500}$

Step-by-step solution

4 steps

  1. Identify the components for goodwill calculation.

    The calculation of goodwill involves summing the cost of investment and Non-Controlling Interest (NCI) at acquisition to get the total purchase consideration, then subtracting the net assets acquired.

  2. List the given values.

    From the image, the values are:

    • Cost of investment = $15,000
    • NCI @ Acquisition = $3,500
    • Net Asset of Acquisition = $14,000

  3. Calculate the Purchase Consideration.

    The purchase consideration is the sum of the cost of investment and NCI at acquisition.

    Purchase Consideration=Cost of investment+NCI @ Acquisition\text{Purchase Consideration} = \text{Cost of investment} + \text{NCI @ Acquisition}

    Purchase Consideration=$15,000+$3,500\text{Purchase Consideration} = \$15,000 + \$3,500 Purchase Consideration=$18,500\text{Purchase Consideration} = \$18,500

  4. Calculate Goodwill.

    Goodwill is calculated by subtracting the net assets of acquisition from the total purchase consideration.

    Goodwill=Purchase Consideration−Net Asset of Acquisition\text{Goodwill} = \text{Purchase Consideration} - \text{Net Asset of Acquisition}

    Goodwill=$18,500−$14,000\text{Goodwill} = \$18,500 - \$14,000 Goodwill=$4,500\text{Goodwill} = \$4,500

    The calculation is as follows:

    Cost of investment=$15,000NCI @ Acquisition=$3,500Purchase Consideration=$15,000+$3,500=$18,500Less: Net Asset of Acquisition=$14,000Goodwill=$18,500−$14,000=$4,500\begin{align*} \text{Cost of investment} & = \$15,000 \\ \text{NCI @ Acquisition} & = \$3,500 \\ \text{Purchase Consideration} & = \$15,000 + \$3,500 = \$18,500 \\ \text{Less: Net Asset of Acquisition} & = \$14,000 \\ \text{Goodwill} & = \$18,500 - \$14,000 = \boxed{\mathbf{\$4,500}} \end{align*}
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