Lu Nan Limited Acquired 80% of the Share Capital and Reserves

question 23

Multiple Choice

Lu Nan Limited acquired 80% of the share capital and reserves of Hui Limited for $20 000.Share capital was $10 000 and reserves amounted to $6 000.All assets and liabilities were recorded at fair value except plant which was recorded at $1 000 below fair value.The company tax rate was 30%.The partial goodwill method is adopted by the group.The amount of goodwill acquired by Lu Nan Limited in this business combination was:

• A)$4 000
• B)$6 640
• C)$7 200
• D)$13 360.

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