Harry acquires 100% of David on January 1, 2010 by issuing 10,000 shares with par value $1 and fair value $70. In addition, Harry agrees to pay an additional $100,000 if David earns $50,000 net income in 4 years. David will be operated as a separate subsidiary of Harry. At acquisition date, there is a 80% probability of this occurring. On January 1, 2010, Harry had net assets with book value of $400,000 and fair value of $500,000. At that date, David had net assets with book value of $200,000 and fair value of $150,000. At December 31, 2012, Harry has net assets with book value of $600,000 and fair value of $800,000. At that date, David has net assets with book value of $300,000 and fair value of $400,000. Assume that all differences between book value and fair value relate to Land. a. Ho w much is goodwill at January 1, 2010 (show calculation). b. How much is goodwill at December 31, 2012 (assume no impairment)
Harry acquires 100% of David on January 1, 2010 by issuing 10,000 shares with par value $1 and fair value $70. In addition, Harry agrees to pay an additional $100,000 if David earns $50,000 net income in 4 years. David will be operated as a separate subsidiary of Harry. At acquisition date, there is a 80% probability of this occurring. On January 1, 2010, Harry had net assets with book value of $400,000 and fair value of $500,000. At that date, David had net assets with book value of $200,000 and fair value of $150,000. At December 31, 2012, Harry has net assets with book value of $600,000 and fair value of $800,000. At that date, David has net assets with book value of $300,000 and fair value of $400,000. Assume that all differences between book value and fair value relate to Land.
a. Ho w much is
b. How much is goodwill at December 31, 2012 (assume no impairment)
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