Hardware, Inc. purchased 100% of the common shares of Software, Inc. for $470,000 on 1/1/07.  Software, Inc.'s balance sheet just before the purchase appears below:

Cash                                                    $    90

Net fixed assets                                       220

Total assets                                             310

Liabilities                                                 240

Stockholders' equity                                 70

Total liabilities and stockholders' equity    310

The fair market value of Software's assets and liabilities were equal to their book values. 

1) Compute the goodwill recognized by Hardware for the purchase.

2) How would goodwill appear on Hardware's financial statements?

3) Hardware has net income, excluding Software for 2007 of $150,000.  Software has a net loss for 2007 of $10,000.  Compute consolidated net income for 2007. 

Answer rating: 100% (QA)

Part 1 Goodwill Purchase consideration Net identifiable assets 470000 70000 400000 Working note... View the full answer