Jabba Ltd Acquired a 70 Per Cent Interest in Han

question 5

Multiple Choice

Jabba Ltd acquired a 70 per cent interest in Han Ltd on 30 June 2012 for €2 000 000.On the same date,Han Ltd acquired a 60 per cent interest in Leia Ltd for a cash consideration of €1 600 000.The purchase price represents the fair value of consideration transferred for both investments.The following information is available: $$\begin{array} { | l | r | r | } \hline \text { Balances at the date of acquisition: } & \text { Han Ltd } & \text { Leia Ltd } \\\hline \text { Share capital } & 2000000 & 1600000 \\\hline \text { Retained earnings } & \underline { 600000 } & \underline { 800000 } \\\hline & \underline { 2600000 } & \underline { 2400000 } \\\hline \text { Profit for year ended 30 June 2013: } & \\\hline \text { Net profit after tax } & \underline { 200000 } & \underline { 300000 } \\\hline\end{array}$$ No dividends have been declared since acquisition and there were no intragroup transactions during the year. What is the non-controlling interest in Han Ltd and Leai Ltd as at 30 June 2013,respectively using the partial goodwill method (round to the nearest dollar) ?

• A)€780 000; €960 000
• B)€857 143; €1 066 667
• C)€900 000; €1 134 000
• D)€977 143; €1 240 667

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Definitions:

Firm

A business organization, such as a corporation or partnership, that sells goods or services in exchange for revenue.

Profit-Maximizing Firm's Output

The output level at which a firm achieves the maximum possible profit, typically where marginal cost equals marginal revenue.

Perfectly Competitive Firm

A theoretical concept where a company operates in a market where there are many buyers and sellers, all selling homogeneous products, with no barriers to entry or exit.

Monopolist's Product

A product that has no close substitutes, making the seller the sole provider and able to control market prices.