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Goodwill journal entries

Goodwill journal entries

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?

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By tom123
25th Feb 2016 11:33

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.

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