Under the acquisition method of accounting for a business combination when the parent company has acquired only 90% of the voting stock of a subsidiary,
A) 10% of the goodwill will be reported in a separate section of the balance sheet because it belongs to the noncontrolling interest.
B) The consolidated balance sheet will report 100% of the value of goodwill.
C) The consolidated balance sheet will report 90% of the value of goodwill.
D) Goodwill will be amortized over its useful life or 40 years whichever comes first.

Question

Quizplus · Accepted Answer

Under the acquisition method, when consolidating the financial statements of a parent company and its subsidiary, 100% of the goodwill is reported on the consolidated balance sheet, regardless of the percentage of ownership. This includes the goodwill attributable to both the parent and the noncontrolling interest.

Under the Acquisition Method of Accounting for a Business Combination