ExpertHard1 markMultiple Choice
CPA · Question 29 · Area II: Technical Accounting
Parent Co acquires 80% of Sub Co for $800,000 cash. The fair value of Sub Co's identifiable net assets is $900,000. The fair value of the 20% non-controlling interest (NCI) is $180,000. What amount of Goodwill should be reported in the consolidated balance sheet?
Parent Co acquires 80% of Sub Co for $800,000 cash. The fair value of Sub Co's identifiable net assets is $900,000. The fair value of the 20% non-controlling interest (NCI) is $180,000. What amount of Goodwill should be reported in the consolidated balance sheet?
Answer options:
A.
$80,000
B.
$80,000
C.
$100,000
D.
$60,000
How to approach this question
Full Goodwill Method (US GAAP): (Fair Value of Consideration + Fair Value of NCI) - Fair Value of Net Assets.
Full Answer
B.$80,000✓ Correct
Total Fair Value of the Entity = $800,000 (Parent share) + $180,000 (NCI share) = $980,000. Less FV of Net Assets ($900,000) = $80,000 Goodwill.
Common mistakes
Calculating partial goodwill (IFRS method) or forgetting NCI.
Practice the full CPA BAR Practice Exam 2
50 questions · hints · full answers · grading
More questions from this exam
Q01Orion Manufacturing provided the following data for the current year:<br/><br/>- Net Sales: $5,00...HardQ02A company has a Debt-to-Equity ratio of 1.5 and a Times Interest Earned (TIE) ratio of 4.0. The c...HardQ03An analyst is reviewing a company's quarterly revenue data using a visualization tool. The trend ...HardQ04TechSolutions Inc. reports Net Income of $500,000. The following items are included in the calcul...HardQ05A company is implementing a Balanced Scorecard. They have identified 'Employee Training Hours per...Hard