QUESTION:

A company acquired a subsidiary for $500,000, which had assets with a fair value of $400,000 and liabilities with a fair value of $300,000. What would be the goodwill recognized in the acquisition?

Answer:

The goodwill recognized in the acquisition would be $400,000 (($500,000 - ($400,000 - $300,000)).

Here's the tabulated working calculation for the goodwill recognized in the acquisition

To calculate the goodwill recognized in the acquisition, we need to subtract the fair value of the subsidiary's liabilities from the fair value of its assets ($400,000 - $300,000), which gives us $100,000. Then, we subtract that amount from the purchase price of the subsidiary ($500,000 - $100,000), which gives us $400,000 in goodwill.

Therefore, the goodwill recognized in the acquisition would be $400,000.