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      Question

      Under purchase method of consolidation (older term),

      goodwill on consolidation arises when:
      A Fair value of identifiable net assets > consideration paid Correct Answer Incorrect Answer
      B Consideration paid > fair value of identifiable net assets acquired Correct Answer Incorrect Answer
      C No goodwill arises in consolidation Correct Answer Incorrect Answer
      D Goodwill always negative Correct Answer Incorrect Answer
      E Goodwill equals reserves of subsidiary Correct Answer Incorrect Answer

      Solution

      Pay more than fair value β†’ goodwill recognised.

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