River Ltd pays $5,500,000 for a 70% share in Stream Ltd. The net assets acquired in Stream Ltd are valued at $5,000,000. The $500,000 difference will appear in River Ltd's statement of financial position as:
A)goodwill on consolidation.
B)mortgage payable.
C)long-term investment.
D)acquisition reserve.

Question

Quizplus · Accepted Answer

The difference of $500,000 is the excess of the amount paid for the investment over the net assets acquired. This excess is known as goodwill and will be recognized as an intangible asset in River Ltd's statement of financial position.

River Ltd Pays $5,500,000 for a 70% Share in Stream