Goodwill arises when a parent company:
A) pays less to acquire a subsidiary company than the carrying amount of the subsidiary's net assets
B) pays less to acquire a subsidiary company than the fair value of the subsidiary's net assets
C) pays more to acquire a subsidiary company than the fair value of the subsidiary's net assets
D) pays more to acquire a subsidiary company than the carrying amount of the subsidiary's net assets

Question

Quizplus · Accepted Answer

Goodwill arises when a parent company pays more to acquire a subsidiary company than the fair value of the subsidiary's net assets. This represents the excess payment made over the fair value of the net identifiable assets and is recognized as an intangible asset on the balance sheet.

Goodwill Arises When a Parent Company