Ask Question
11 May, 02:16

Juliana Corporation purchased all of the outstanding stock of Caldwell Inc., paying $4,500,000 cash. Juliana assumed all of the liabilities of Caldwell. Book values and fair values of acquired assets and liabilities were:

Book Value Fair Value

Current assets (net) $230,000 $540,000

Property, plant, & equip. (net) 1,650,000 2,080,000

Liabilities 490,000 660,000

Juliana would record goodwill of:

$ 2,540,000.

$ 3,120,000.

$ 170,000.

$ 7,800,000.

+5
Answers (1)
  1. 11 May, 06:12
    0
    The answer is $2,540,000

    Explanation:

    Using Fair Value (FV) method:

    Fair Value of Total Assets = FV of Property, Plant & Equipment + FV of Current Assets.

    FV of Total Assets = $2,080,000+$540,000 = $2,620,000

    FV of Liability (As given) = $660,000

    FV of Net Assets = FV of Total Assets - FV of liabilities

    = $2,620,000-$660,000 = $1,960,000

    Goodwill = Consideration paid - FV of Net Assets of the acquired company.

    = $4,500,000-$1,960,000

    = $2,540,000.

    Goodwill represents the extra amount paid on the acquired company in excess of its net assets. This could be because the acquired has a stronger brand, better customer base or any other values that the acquirer considered as valuable for their business.
Know the Answer?
Not Sure About the Answer?
Get an answer to your question ✅ “Juliana Corporation purchased all of the outstanding stock of Caldwell Inc., paying $4,500,000 cash. Juliana assumed all of the liabilities ...” in 📙 Business if there is no answer or all answers are wrong, use a search bar and try to find the answer among similar questions.
Search for Other Answers