Question: HBABB Corp has purchased all of the 10 million shares
HBABB Corp. has purchased all of the 10 million shares of BOBCO stock for $43.75 a share. BOBCO’s net asset value is $350 million. How much goodwill does HBABB need to consider on its balance sheet? Suppose part of the deal requires HBABB to pay $30 million of BOBCO’s debt. Refigure the net asset value (i.e., reduce the debt by $30 million) and then recalculate the goodwill. One of your accountants tells you that the net asset value should not be changed and that the $30 million used for BOBCO’s debt should be added to the purchase price. Refigure the goodwill calculation and determine if there really is a difference. If there is a difference, which calculation is correct?
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