Arnez Ltd. acquired 70% of Bedard Ltd. At the acquisition date, Bedard's net identifiable assets had a carrying value of $825,000 and a fair value of $1,000,000. Arnez paid $910,000 for the acquisition. Under the parent-company extension method, what amount should be reported for goodwill on Arnez's consolidated statement of financial position?
A)$210,000
B)$300,000
C)$332,500
D)$475,000

Question

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase consideration over the acquirer's share of the fair value of the net identifiable assets of the acquiree. Arnez paid $910,000 for a 70% stake, and the fair value of Bedard's net identifiable assets was $1,000,000. Arnez's share of the fair value is 70% of $1,000,000 = $700,000. The goodwill is therefore $910,000 (purchase consideration) - $700,000 (fair value of net identifiable assets acquired) = $210,000.

Arnez Ltd Acquired 70% of Bedard Ltd