Jiminez Limited acquired 80% of the shares in Mustang Limited for $150 000. At acquisition date, share capital in Mustang was $150 000 and reserves amounted to $50 000. All assets and liabilities of Mustang were recorded at fair value at acquisition date. The partial goodwill method is adopted by the group. If the company tax rate was 30%, the NCI will recognise a gain on bargain purchase of:
A) Nil.
B) $10 000.
C) $40 000.
D) $50 000.

Question

Quizplus · Accepted Answer

Under the partial goodwill method, only the parent's share of goodwill is recognized. Since the purchase price equals the fair value of the net assets acquired, there is no goodwill or gain on bargain purchase recognized for the NCI.

Jiminez Limited Acquired 80% of the Shares in Mustang Limited