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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 → goodwill recognised.

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