Question

On July 1, 2013, Parent paid $2,500,000 to purchase a 75% interest in Subsidiary’s voting common stock. On that date, the fair value of the 25% interest not purchased by Parent was $500,000. The acquisition-date fair value of the identifiable net assets of Subsidiary was $1,900,000. 21.

What is the amount of the goodwill assigned to Parent?

Answer 1

$825,000

Step-by-step explanation:

According to the International Financial Reporting Standards 3, the calculation of goodwill at acquisition is given by the formula : Consideration paid by parent + non-controlling interest – fair value of the subsidiary's net identifiable assets = consolidated goodwill.

Therefore goodwill in the given scenario is:

$2,500,000+$500,000-$1,900,000 = $1,100,000

The amount of goodwill assigned to parent = 0.75*1,100,000=$825,000