Question:

Why is a debit to goodwill not part of the entry to record the acquisition? Please explain with easier way so I can understand because I don't understand the explanation above from my review course.

Plant Company acquired controlling interest in Seed Company in a legal acquisition. Which one of the following could not be part of the entry to record the acquisition? Debit: Investment in Seed Company Correct Debit: Goodwill O Credit: Cash Your Answer O Credit: Common stock This Answer is Correct The entry that Plant will make to record its legal acquisition of Seed cannot include a debit to Goodwill. The entry Plant makes will debit (only) the Investment account and credit whatever form(s) of consideration is given (e.g., Cash, Bonds Payable, Common Stock, etc.). Goodwill cannot be debited at the time of the acquisition, though it may be recognized at the time of consolidation