Tag: Fair Value

Alex ltd has assets with a fair value of £150,000.

There is agreed negative goodwill of £30,000.

Lucy Ltd made an offer to acquire the net assets of Alex Ltd for 16,000 ordinary shares with a face value of £2.00 at a premium of £3 for each share.

How much were the liabilities acquired?

Select ONE answer:

1. £40,000
2. £70,000
3. £80,000
4. £100,000

Show your workings to arrive at your answer, and explain and justify your reasons:

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This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 1

1. Correct – 16,000 * (£2 + £3) = £80,000 price paid so liabilities equals £150,000 – £30,000 = £120,000 with the difference per Accounting Equation A-L=C where L = £40,000
2. Not correct
3. Not correct
4. Not correct

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