1 answer

On July 1, 2012, an acquiring company Corp. paid $1,100,000 for 100% of the outstanding common...

Question:

On July 1, 2012, an acquiring company Corp. paid $1,100,000 for 100% of the outstanding common stock of an investee company i

On July 1, 2012, an acquiring company Corp. paid $1,100,000 for 100% of the outstanding common stock of an investee company in a transaction that qualifies as a business combination. Immediately preceding the transaction, the investee company had the following condensed balance sheet: Pre-acquisition amounts reported on investee's balance sheet Current assets $150,000 Property and equipment, net 1,400,000 Liabilities 750,000 Equity 800,000 The acquisition-date fair value of the property and equipment was $220,000 more than its carrying amount. For all other assets and liabilities, the pre-acquisition amounts reported on investee's balance sheet were equal to their respective fair values. Effects of consolidation on reported balance sheet amounts What amount of goodwill related to the acquisition of the investee must the acquiring company report in its consolidated balance sheet immediately following the acquisition of investee company common stock? $0 $80,000 $220,000 $300,000

Answers

(b) $80,000

Fair Value of PPE $16,20,000 =220000+1400000
+Fair Value of Current Assets $1,50,000
-Fair Value of Liabilities -$7,50,000
Fair Value of Net Assets (a) $10,20,000
Purchase Consideration (b) $11,00,000
Goodwill (b-a) $80,000
.

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