ACCA Applied Knowledge · Financial Accounting · Subsidiaries
Hold acquired 60% of Target for $90,000 when Target's net assets had a fair value of $120,000. Non-controlling interest is measured at fair value, which was $55,000 at the acquisition date. What is the goodwill on acquisition?
Goodwill is $25,000. Under the fair value method, it equals consideration of $90,000 plus non-controlling interest at fair value of $55,000, less the fair value of identifiable net assets of $120,000.
- A$25,000Correct
- B$18,000
- C$13,000
- D$33,000
Explanation
Goodwill = consideration 90,000 + NCI at fair value 55,000 − net assets 120,000 = $25,000. Using the proportionate method would give 90,000 + 48,000 − 120,000 = $18,000, which is not what the question specifies.
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