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Glosgow Co Case
On 1 October 20X3, Glosgow acquired 90 million of Sandal’s 150 million $0.50 equity shares. Glosgow will pay $1.54 cash on 30 September 20X4 for each share acquired. Glosgow’s finance cost is 10% per annum. Sandal’s share price as at 1 October 20X3 was $1.25. The statements of profit or loss and other comprehensive income for the year ended 31 March 20X4 are:

  Glosgow Sphere Frank Co
  $'000 $'000 $'000
Revenue         620,000       310,000             70
Cost of sales       (400,000)     (150,000)            (30)
Gross profit         220,000       160,000             40
Distribution costs         (40,000)       (20,000)  
Administrative expenses         (36,000)       (25,000)  
Investment income              5,000          1,600  
Finance costs           (2,000)         (5,600)            (10)
Profit before tax         147,000       111,000             30
Income tax expense         (45,000)       (31,000)              (5)
PROFIT FOR THE YEAR         102,000         80,000             25
Other comprehensive income:      
Gain/(loss) on revaluation of land (note (ii))           (2,200)          1,000               5
TOTAL COMPREHENSIVE INCOME FOR THE YEAR           99,800         81,000             30

The following information is relevant:

1. A fair value exercise on 1 October 20X3 concluded that the carrying amounts of Sandal’s net assets were equal to their fair values with the following exceptions:

  • Plant with a remaining life of two years had a fair value of $6 million in excess of its carrying amount. Plant depreciation is charged to cost of sales.  
  • Glosgow placed a value of $5 million on Sandal’s good relationships with its customers. Glosgow expected, on average, a customer relationship to last for a further five years. Amortisation is charged to administrative expenses.
2. Sandal’s land, valued using the revaluation model, increased by $1 million since the acquisition.  

3. After the acquisition Glosgow sold goods to Sandal for $20 million at a 25% mark‐up. Sandal had one fifth of these goods still in inventory at 31 March 20X4.

4. All items accrue evenlyover the year unless otherwise indicated. Sandal had retained earnings of $70 million at 1 April 20X3. There were no other components of equity at this date

5. Glosgow measures the non‐controlling interest at fair value at the date of acquisition. To calculate fair value, the share price of Sandal should be used.


A. Calculate goodwill arising on the acquisition of Sandal as at 1 October 20X3.    
B. Prepare the consolidated statement of profit or loss and other comprehensive income of Glosgow for the year ended 31 March 20X4.     

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