ABC Company has the following assets and liabilities: Carrying ValueFair Market ValueAccounts Receivable500,000450,000Building5,200,0005,800,000Machinery400,000550,000Bonds payable(200,000)(200,000)Assume that a purchaser pays ₱7,000,000. How much is the amount of goodwill if any?

A company pays $3,400,000 to purchase another company's assets and liabilities. The fair value of the net assets being purchased is $3,200,000. How much goodwill is reported?Select answer from the options below$3,200,000$200,000$0$3,400,000

Goodwill is equal to the excess of the cost of an acquired company over the sum of the:Group of answer choicesmarket value of its net assetsmarket value of its assetsbook value of its assetsbook value of its net assets

X and Y are partners in a firm with capital of 1,80,000 and 2,00,000. Z was admitted for 1/3rd sharein profits and brings ₹ 3,40,000 as capital, calculate the amount of goodwill

Example 1The following information is given as at 31 March 20X1P Ltd. S Ltd.Non-current Assets:PPE 2,000 500Investment in Subsidiary 1,000Net Current Assets 2,000 5005,000 1,000Issued Capital 500 1,000Reserves and Surplus 4,5005,000 1,000P Ltd. acquired 100% of shares of S Ltd. on 31 March 20X1 for` 1,000.Since P Ltd. has acquired S Ltd., we will have to determine goodwill / capitalreserve. Let us understand why goodwill / capital reserve arises in case ofconsolidation, and what would be the interpretation of the same.© The Institute of Chartered Accountants of IndiaADVANCED ACCOUNTING10.22In the given case, P Ltd. acquired all the shares of S Ltd. by paying` 1,000. Thispayment (i.e., purchase consideration) would be made by P Ltd. to theshareholder(s) of S Ltd. (hence the transfer of this amount would not appear in thebooks of S Ltd.).By paying` 1,000, P Ltd. has acquired ‘control’ over S Ltd. This acqu isition is quitedifferent from the concept of amalgamation done in accordance with AS 14, thoughthe concept of goodwill / capital reserve is similar. Under AS 14, the targetcompany would generally liquidate, and all assets and liabilities would betransferred from the Selling Company to the Purchasing Company. In case ofconsolidation, P Ltd. is acquiring ‘control’ i.e., by way of acquiring equity shares in SLtd.. Thus, S Ltd. continues to exist, and the assets and liabilities of S Ltd. are nottransferred to P Ltd., but instead continue to remain with S Ltd. only. However, sincein substance, acquisition has taken place (albeit through transfer of control), thepurchase consideration of` 1,000 will be compared with the net worth ofS Ltd., which is` 1,000. Since amount paid (i.e., purchase consideration) equals thenet worth, no goodwill / capital reserve is recognized. In case the amount paid (i.e.,purchase consideration) would be higher / lower than the net worth of S Ltd., suchdifference would be recognized in Goodwill / Capital Reserve respectively.

A firm earned a profit of Rs 50000 on the capital of RS./400000 normal rate of return is 12%calculate the value of goodwill at 3 year purchase of super profit