Following an acquisition,the acquiring firm's balance sheet shows an asset labeled "goodwill." What form of merger accounting was used?

Question

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The presence of the "goodwill" asset on the acquiring firm's balance sheet indicates that the purchase method of merger accounting was used. In this method, the acquiring firm records the acquired company's assets and liabilities at their fair market value at the time of acquisition, and any excess cost paid over the fair market value is recorded as goodwill. Consolidation and aggregation methods do not involve the recognition of goodwill as a separate asset.

Following an Acquisition,the Acquiring Firm's Balance Sheet Shows an Asset