On 1 July 20X6 Possum acquired a 100% interest in Echidna.At that time Echidna had goodwill of $5 000 recorded in its statement of financial position as a result of a previous business combination.The total goodwill arising on Possum's acquisition of Echidna was $12,000.The goodwill recognised on consolidation as a result of Possum's acquisition of Echidna is:
A)nil
B)$5 000
C)$7 000
D)$12 000

Question

Quizplus · Accepted Answer

Goodwill arising from a previous business combination cannot be recognised as part of the goodwill arising on a subsequent acquisition. Therefore, the $5 000 goodwill recorded in Echidna's statement of financial position should not be included in the calculation of goodwill arising on Possum's acquisition. The remaining $7 000 is the goodwill recognised on consolidation as a result of Possum's acquisition of Echidna.

On 1 July 20X6 Possum Acquired a 100% Interest in Echidna.At