Gargantua Ltd paid $1 000 000 for 75 per cent of the voting shares of Dwarf Ltd,and evaluated Dwarf's assets to be worth $1 500 000 and its liabilities $300 000.What was the goodwill on consolidation at the date of acquisition?
A) $100 000
B) $200 000
C) $300 000
D) None of the answers provided

Question

Quizplus · Accepted Answer

The net assets of Dwarf Ltd are $1,200,000 ($1,500,000 assets - $300,000 liabilities). 75% of this is $900,000. Gargantua Ltd paid $1,000,000, so the goodwill is $1,000,000 - $900,000 = $100,000.

Gargantua Ltd Paid $1 000 000 for 75 Per Cent