Goodwill on acquisition is recorded when:
A) the cost of the acquisition of the subsidiary is less than the fair value of the subsidiary equity
B) the cost of the acquisition is more than the fair value of the subsidiary equity
C) the cost of the acquisition is equal to the fair value of the subsidiary equity
D) none of the above

Question

Quizplus · Accepted Answer

Goodwill on acquisition is recorded when the cost of the acquisition is more than the fair value of the subsidiary equity. This occurs when the acquirer pays a premium for the subsidiary assets or believes that the subsidiary has intangible assets that have not been recognized in its financial statements. The premium value paid over and above the fair value of the subsidiary equity is recorded as goodwill on the acquirer's balance sheet.

Goodwill on Acquisition Is Recorded When