Dobson Co. purchased 80% of Niki Ltd. for $1,200,000. At the date of acquisition, the carrying value of Niki's net identifiable assets was $1,000,000, and the fair value was $1,300,000 net of tax. What is the amount of the goodwill under the partial goodwill method?
A)$200,000.
B)$160,000.
C)$300,000.
D)$0.

Question

Quizplus · Accepted Answer

Under the partial goodwill method, the goodwill recognized is only attributable to the parent company's share of the net assets acquired. The amount of goodwill is calculated as follows: 
Purchase price = $1,200,000
Carrying value of net identifiable assets = $1,000,000
Fair value of net identifiable assets (80% x $1,300,000) = $1,040,000
Goodwill = Purchase price - (Carrying value of net identifiable assets x Parent company's share)
Goodwill = $1,200,000 - ($1,000,000 x 80%) = $160,000. 
Therefore, the correct answer is B.

Dobson Co Purchased 80% of Niki Ltd