Goodwill on purchase
I'm in the process of preparing first year accounts for a external stakeholder, I need to prepare accounts for individual companies as well as consolidated financial statements.
A client of mine has purchased company x for £420,000, the net assets of this company at acquisition date were £240,000 this included goodwill for £250,000.
Secondly company x shares were brought by a clients holding company (y) via business loan in which he owns all issued shares.
I have a number of questions which I require clarification for please.
The first one involving company x when preparing individual financial statements, do I include the total goodwill of £250,000 in balance sheet or do I elminate it against the reserves?
My second question is in company Y (holding company) balance sheet I have shown purchase of company x as a Investment of £420,000, is this the correct treatment?
Finally when preparing consolidated accounts goodwill on acquisation will be £180,000 or do include £250,000 as well which will create total goodwill of £430,000, which become more than cost price of £420,000?
I would be grateful if any consolidation experts could add some light to this, company x £250,000 goodwill is causing me big issues, as I have not come across this in long time. All suggestions would be highly appreciated.