[Dansa]

Hi Stephen thanks

So, let’s suppose we sell sub, we first calculate gain loses as

Credit net assets at fair value 30
Credit goodwill 10
Debit cash 50
Credit gain 10

If we revalued say from 20 to 30 when sub was bought at tax rate of 10% we have

DT liability for 1

-When we sell sub then have

Debit DT 1
Income tax expense 1 for the sale now
Credit tax liability for 2 which is the DT plus tax for the sale

Is that correct?

[Dansa]

Hi Stephen thanks

just for my knowledge (not referred to exams) but I would like to know the entries

First one would be
debit Goodwill
debit Net assets at book value
credit cash
credit NCI

second would be
debit net asset for fair value adj
credit goodwill (because when net asset increase goodwill reduces)

third would be
debit goodwill (because DT is a liability and reduces net assets hence goodwill increase)
credit D tax for the tax rate times fair value adj

are these correct? I might have another question later if you don’t mind

thanks
Daniel

[Dansa]

Also

If we have 10 (cost less fair value) goodwill then credit it by 30 and debit 9, would not it be negative or the first journal before anything is goodwill 40 debit, debit net assets 60, credit cash 100?

Then the others you suggested for fair value adj and DT?

[Dansa]

Hi Stephen

Sorry for late reply and thanks so much

I didn’t know that as i was taught to calc goodwill first and then do journals like

debit goodwill, credit NCI, credit cash (paid cash), debit net assets

So what are the correct journals? first fair value adj crediting goodwill, then the debit for DT?

Perhaps can you show me what journals would you make that involve debiting and crediting goodwill?

Thanks so much
Dan

[Dansa]

Great

Thanks

[Dansa]

Ah thanks so much that helps lots

Basically, we have deferred tax for the revaluation of assets and liabilities of a subsidiary to calcualte goodwill in business combinations but not for goodwill itself – right?

[Author]

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