Mega Corporation acquired 65% of the voting shares of Forko Ltd for €10 billion and used the purchase method of accounting for the merger.Mega Corporation's interest in Forko Ltd.had a restated value of €950 million.How should the difference be accounted for by Mega Corporation?
A)As Gain from Acquisition on the current period income statement
B)As Goodwill on the consolidated balance sheet
C)As a Loss from Merger on the current period income statement
D)As Additional Paid-in Capital on the consolidated balance sheet

Question

Quizplus · Accepted Answer

The difference between the fair value of the consideration paid (€10 billion) and the fair value of the net assets acquired (€950 million) is €9.05 billion, which represents the goodwill acquired by Mega Corporation. Therefore, it should be accounted for as Goodwill on the consolidated balance sheet.

Mega Corporation Acquired 65% of the Voting Shares of Forko