Advanced Accounting
14th Edition
ISBN: 9781260726435
Author: Joe Ben Hoyle
Publisher: Mcgraw-hill Higher Education (us)
expand_more
expand_more
format_list_bulleted
Question
Chapter 18, Problem 27P
To determine
Identify the correct option out of the given statements.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
AB is a private not-for-profit entity. It acquires YZ, another private not-for-profit entity. The acquisition value is $1 million. YZ has net assets with a book value of $600,000 but a fair value of $700,000. Officials for AB expect that YZ will be predominantly supported by contributions in the future. After the acquisition, what amount of goodwill will be reported on the combined balance sheet?
$–0–
$100,000
$300,000
400,000
AB is a private not-for-profit entity. It acquires YZ, another private not-for-profit entity. The acquisition value is $1 million. YZ has net assets with a book value of $600,000 but a fair value of $700,000. Officials for AB expect that YZ will be predominantly supported by contributions in the future. After the acquisition, what amount of goodwill will be reported on the combined balance sheet? Choose the correct.a. $–0–b. $100,000c. $300,000d. $400,000
Melton Devices acquires Beck, a small start-up company, by paying $2,170,900 in cash on January 2. Following are the book values and fair values of Beck on the date of acquisition.
(Click the icon to view the book values and fair values.)
Read the requirements.
Requirement a. What is the amount of goodwill acquired?
The amount of goodwill acquired
Requirement b. What intangible assets are acquired? Which of the intangibles have an indefinite life? Which will be amortized? What will the amortization expense be in the year after acquisition? (If an input field
is not used in the table leave the field empty, do not enter a zero)
Intangible
Asset
Finite or
Indefinite Life
Amortization
Amortized?
Expense
Trial Balance
Beck
Book Value
Fair Value
Cash
$
29,000 $
29,000
Receivables
100,700
100,650
Manufacturing Equipment
640,350
654,500
Patents (remaining life 8 years)
60,600
684,000
Trademarks
14,650
187,500
Payables
58,904
58,904
Print
Done
Knowledge Booster
Similar questions
- ABC Corporation purchased XYZ Inc. The latter has the following account balances: The noncurrent assets have a fair value of P4,500,000. ABC paid the owners of XYZ a total purchase price of P4,500,000. How much is the goodwill that ABC should record from this acquisition? *refer to attached photoarrow_forwardBryer Co. purchases all of the assets and liabilities of Stellar Co. for $1,500,000. The fair value of Stellar’s assets is $2,000,000, and its liabilities have a fair value of $1,200,000. The book value of Stellar’s assets and liabilities are not known. For what amount would Bryer record goodwill associated with the purchase? a. $800,000.b. $500,000.c. $700,000.d. $0.arrow_forwardOn September 1, 2019, Winans Corporation acquired Aumont Enterprises for a cash payment of £800,000. At the time of purchase, Aumont’s statement of financial position showed assets of £600,000, liabilities of £200,000, and equity of £400,000. The fair value of Aumont’s assets is estimated to be £800,000. Compute the amount of goodwill acquired by Winans.arrow_forward
- On September 1, 2020, Flint Corporation acquired Tamarisk Enterprises for a cash payment of $710,000. At the time of purchase, Tamarisk's balance sheet showed assets of $560,000, liabilities of $240,000, and owners' equity of $320,00O. The fair value of Tamarisk's assets is estimated to be $790,000. Compute the amount of goodwill acquired by Flint. Value assigned to goodwill $arrow_forwardSouthwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. Northeast expects to receive some support through donations and contributions. However, it is not expected to be predominantly supported by contributions and investment income. After the combination, what should be reported for goodwill? $–0– $30,000 $60,000 $360,000arrow_forwardSouthwest is a private not-for-profit entity. It acquires Northeast, another private not-for-profit. The acquisition value is $980,000. Northeast has two assets (and no liabilities): equipment with a net book value of $120,000 but a fair value of $150,000 and a building with a net book value of $500,000 but a fair value of $800,000. Northeast expects to receive some support through donations and contributions. However, it is not expected to be predominantly supported by contributions and investment income. After the combination, what should be reported for goodwill? Choose the correct.a. $–0–b. $30,000c. $60,000d. $360,000arrow_forward
- In which of the following situations would Martinez Indus-tries include goodwill in its balance sheet? a. The fair market value of Martinez’s net identifiableassets amounts to $2,000,000. Normal earnings for thisindustry are 15 percent of net identifiable assets. Netincome for the past five years has averaged $390,000.b. Martinez spent $800,000 during the current year for research and development for a new product that prom-ises to generate substantial revenue for at least 10 years. c. Martinez acquired Baxter Electronics at a price in excess ofthe fair market value of Baxter’s net identifiable assets. d. A buyer wishing to purchase Martinez’s entire opera-tion has offered a price in excess of the fair market value of the company’s net identifiable assets.arrow_forwardA Ltd purchases the B Ltd for the following consideration of: Cash : $150 000 Land: carrying amount of the land is $120 000; fair value is $195 000. The statement of financial position of the B Ltd as at the date of acquisition shows assets of $390 000 and liabilities of $195 000. All assets are fairly valued except the B Ltd's building, which is in the accounts at $70 000 but has a fair value of $95 000. There are no contingent liabilities. Required: Calculate the value of goodwill?arrow_forwardIf a company exchanges an asset with a book value of $260,000, an original cost of $500,000, and a fair value of $300,000 plus cash of $100,000 for a new asset, what is the gain or loss recognized on the transaction?arrow_forward
- Fairgate Company’s 12/31/19 statement of financial position reports assets of $6,000,000 and liabilities of $2,500,000. All of the book values of Fairgate’s assets approximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value. On 12/31/19, Morris Corporation paid $6,500,000 to acquire Fairgate. What amount of goodwill should Morris record as a result of this purchase?arrow_forwardBuchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000. A. What is the amount of goodwill in this transaction? B. What is Buchanans journal entry to record the purchase of McLaren? C. What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?arrow_forwardA Ltd purchases the B Ltd for the following consideration of: Cash : $150 00 Land: carrying amount of the land is $120 000; fair value is $195 000. The statement of financial position of the B Ltd as at the date of acquisition shows assets of $390 000 and liabilities of $195 000. All assets are fairly valued except the B Ltd's building, which is in the accounts at $70 000 but has a fair value of $95 000. There are no contingent liabilities. Required: Calculate the value of goodwill? Note: Provide all workings. Do not just write the final answer.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College