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At the example 10 of Chapter 7, G/w is calculated ($6.000). But, when calculate the Consolidation RE, total RE of Robertas is $38.875 plus $6.000 (not minus). I don’t understand that? Can Y explain for me.
Because it’s negative goodwill. When Roberta’s bought, he acquired assets worth $6,000 more than the consideration paid – effectively, he made a profit on acquisition (but you mustn’t call it a “profit”)
It’s known officially as a “bargain purchase” and it’s credited to retained earnings at the earliest opportunity ie at the year end following the acquisition
Ok?
I’m OK. Thanks Mike. I can understand that: the cost of investment is lower than the equity of subsidiary so that is credites to RE?
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