1. At the beginning of the year, Company A purchased 30% of Company B for $85,000. On the acquisition date, the book of Company B’s identifiable net assets was $220,000. The fair value and book value of value Company B’s assets and liabilities were the same except for Company B’s equipment, which had a book value of $35,000 and a fair value of $65,000 on the acquisition date. Company B’s equipment is depreciated over ten (10) years using the straight- line method. At the end of the year, Company B reported net income of $115,000 and paid dividends of $57,000.

Calculate the goodwill created as a result of the acquisition

2. Calculate Company A’s income to equity at the end of the year from its investment in Company B

3. Calculate the investment in Company B that appears on Company A’s year-end balance sheet

Answer rating: 100% (QA)

To calculate the goodwill created as a result of the acquisition we need to compare the price paid f... View the full answer