Which of the following combination best demonstrates the value of goodwill? I.Purchase consideration of subsidiary
II.Book Value of net assets held by subsidiary
III.Fair value of net identifiable assets
IV.Contingent liabilities

Question

Quizplus · Accepted Answer

Goodwill is the difference between the purchase consideration of a subsidiary and the fair value of its net identifiable assets (assets minus liabilities). Contingent liabilities are subtracted from this difference to arrive at the actual value of goodwill. Therefore, the correct formula is I less (III-IV).

Which of the Following Combination Best Demonstrates the Value of Goodwill