Major Ltd pays $5,000,000 for a 70% share in Minor Ltd.The net assets acquired in Minor Ltd are valued at $4,500,000.The $500,000 difference will appear in Major 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 $500,000 difference between the purchase price and the net assets acquired will appear in Major Ltd's statement of financial position as goodwill on consolidation, as it represents the premium paid to acquire the controlling interest in Minor Ltd.

Major Ltd Pays $5,000,000 for a 70% Share in Minor