Hi all,
The company I work for ( A limited) is about to buy another company (B Limited).
The fair value of B Limited is say $800,000. We are paying $1,000,000 so there is $200,000 goodwill involved.
What are accounting entries on both sides in their respective books?
Replies (1)
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Only consolidated
Company A: Dr Investment $1m Cr Cash $1m
Company B: No effect - assuming the cash is paid to existing shareholders, so outside the company.
Goodwill is dealt with in the consolidation -
Company A may need to take a charge in the future if the value of the investment falls.