If a parent company acquires a wholly owned subsidiary at an amount greater than the fair value of the net assets, the excess should be

Question

Quizplus · Accepted Answer

Any excess paid over the fair value of net assets is referred to as goodwill. Under the purchase method of accounting, goodwill and any other excess should be allocated to identifiable assets to the extent of their fair values, with any remainder allocated to goodwill. This ensures that the balance sheet reflects the fair value of the acquired assets and liabilities.

If a Parent Company Acquires a Wholly Owned Subsidiary at an Amount