Salmon Ltd Acquired on a Cum Div

question 19

Multiple Choice

Salmon Ltd acquired on a cum div. basis all of shares in Trout Ltd for $520 000. At the date of acquisition, Trout Ltd had recorded a dividend payable of $100 000 and a total shareholders' equity of $400 000. Assuming that the all identifiable assets in Trout Ltd were recorded at fair value at acquisition date, the consolidation worksheet entries will have to recognise:

• A) a goodwill of $220 000.
• B) a goodwill of $120 000.
• C) a goodwill of $20 000.
• D) a gain on bargain purchase of $20 000.

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