Using the acquisition method for a business combination, goodwill is generally calculated as the:

A) Cost of the investment less the subsidiary’s book value at the beginning of the year.

B) Cost of the investment less the subsidiary’s book value at the acquisition date.

C) Cost of the investment less the subsidiary’s fair value at the beginning of the year.

D) Cost of the investment less the subsidiary’s fair value at acquisition date.

E) Zero, it is no longer allowed under federal law.

Answer: D

Learning Objective: 02-04

Learning Objective: 02-05

Topic: Acquisition―Valuation principles

Topic: Acquisition―Calculate goodwill or bargain

Difficulty: 2 Medium

Blooms: Remember

AACSB: Reflective Thinking

AICPA: BB Critical Thinking

AICPA: FN Measurement