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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Goodwill

Pindar Corporation acquired all the outstanding stock of Strauss Company for 523,000,000 on January 1, 2020. On the date of acquisition, Strauss had the following balance sheet:

Chapter A2, Problem 30E, Goodwill Pindar Corporation acquired all the outstanding stock of Strauss Company for 523,000,000 on

All Strauss' assets and liabilities have book values equal to their fair values except for equipment, which has a fair value of $20,700,000.

Required:

1. Calculate the amount of goodwill.

2. Prepare the journal entry by Pindar to record the acquisition.

3. Assume that instead of acquiring all the outstanding common stock of Strauss, Pindar acquired 100% of Strauss’ net assets. What would Pindar’s journal entry be in this case?

To determine

Concept introduction:

When we purchase a company in any value and the amount paid by us is more than the net assets value of the company then the balance amount which is paid in excess is transferred to the goodwill account. This type of goodwill arises when there more amount paid by us and we received less net assets.

Requirement 1:

To calculate:

Amount of goodwill.

Explanation

Net Assets brought = Accounts receivable+ Inventory+ Property, Plant and equipment- Liabilities

= 6800000+ 4700000+ 207...

To determine

Concept introduction:

When we purchase a company in any value and the amount paid by us is more than the net assets value of the company then the balance amount which is paid in excess is transferred to the goodwill account. This type of goodwill arises when there more amount paid by us and we received less net assets.

Requirement 2:

To prepare:

Journal Entry of the business purchases.

To determine

Concept introduction:

When we purchase a company in any value and the amount paid by us is more than the net assets value of the company then the balance amount which is paid in excess is transferred to the goodwill account. This type of goodwill arises when there more amount paid by us and we received less net assets.

Requirement 3:

To prepare:

Journal Entry if we acquired the net assets of the company.

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