On 1 July 2017 Good Ltd acquired a 100% interest in Life Ltd. At that time Life Ltd had goodwill of $10 000 recorded in its statement of financial position as a result of a previous business combination. The total goodwill arising on Good's acquisition of Life was $24 000. The goodwill to be recognised on consolidation as a result of Good's acquisition of Life is:
A) nil.
B) $10 000.
C) $14 000.
D) $24 000.

Question

Quizplus · Accepted Answer

The goodwill to be recognised on consolidation is the difference between the purchase price and the fair value of the identifiable assets and liabilities acquired. Good Ltd acquired a 100% interest in Life Ltd and the total goodwill arising on the acquisition was $24 000. However, Life Ltd already had goodwill of $10 000 recorded in its statement of financial position. Therefore, the goodwill to be recognised on consolidation as a result of the acquisition is $14 000 ($24 000 - $10 000).

On 1 July 2017 Good Ltd Acquired a 100% Interest