ABC Ltd took over assets of ₹14,00,000 and liabilities of ₹4,00,000 of TS Ltd. for the purchase consideration of ₹12,00,000. How will the Goodwill account be treated?
Answer & explanation
Correct answer: option 2
The correct answer is option 2- Debited by ₹2,00,000.
Goodwill = Purchase consideration - Net Assets
= Purchase consideration - (Assets-Liabilities)
= 12,00,000- (14,00,000-4,00,000)
= 12,00,000 - 10,00,000
= 2,00,000
Goodwill is an asset so goodwill is debited with ₹2,00,000.