Question

Plant Company acquired controlling interest in Seed Company in a legal acquisition. Which one of the following could not be part of the entry to record the acquisition?a) Debit: Investment in Seed Companyb) Debit: Goodwillc) Credit: Cashd) Credit: Common stock

Answer 1

The correct answer is B

Step-by-step explanation:

The journal entry which the Plant will make to record on its legal acquisition of the Seed could not include or comprise Debit of Goodwill.

The entry to make for Plant makers will debit (only) the Account of Investment and will credit the whatever form of consideration given (which could be common stock, bonds payable and cash).

The Goodwill could not be debited at the time of the acquisition, so it will be acknowledged or recognized at the time of the consolidation.