Prince Limited acquired 100% of the share capital of Charming Limited for a purchase consideration of $190 000. At acquisition date, the net fair value of Charming Limited's assets, liabilities and contingent liabilities was $175 000 including goodwill with a carrying amount of $5 000. The company tax rate is 30%. The unrecorded amount of goodwill that must be recognised on the consolidation worksheet is:
A) $5 000.
B) $10 000.
C) $15 000.
D) $20 000.

Question

Quizplus · Accepted Answer

The formula to calculate the goodwill that must be recognised on the consolidation worksheet is: 
Goodwill = Purchase consideration - Net fair value of identifiable assets and liabilities 
= $190,000 - $175,000 
= $15,000 
Since there is already $5,000 of goodwill with a carrying amount, only the unrecorded amount of goodwill needs to be recognised on the consolidation worksheet, which is $10,000 (Option C).

Prince Limited Acquired 100% of the Share Capital of Charming