Lisa Corporation made an offer to acquire the assets and assume the liabilities of Toga Corporation. Toga's balance sheet as of December 31, 2012, appears below. Toga has no unrecorded liabilities or contingent liabilities. The market values of Toga's current liabilities approximate their book values. Lisa Corporation offered Toga Corporation's Board of Directors $780,000,000 cash for 100 percent ownership interest.
TOGA CORPORATION
Balance Sheet {in thousands)
December 31, 2012
Assets
Accounts receivable ............................................................... $ 40000
Inventories ............................................................................ 90000
Long-term marketable debt securities. ............................................ 95000Property, plant and equipment ................................................... 275000
Total assets ........................................................................ $500000
Liabilities and Shareholders' Equity
Current liabilities ................................................................. $ 70000
Capital stock ....................................................................... 230000
Retained earnings ................................................................. 200000
Total liabilities and shareholders' equity .................................... $ 500000
The fair values of Toga's assets as of December 31, 2012, are estimated to be as follows:
(in thousands)Fair Value
Accounts receivable .......................................................... $ 40,000
Inventories ..................................................................... 135,000
Long-term marketable debt securities ...................................... 115,000
Property, plant and equipment .............................................. 410,000
Total fair market value ...................................................... $700,000
Required
a. Identify five business factors or conditions that generally give rise to goodwill.
b. Determine the amount of goodwill that would be recorded on the books of Lisa Corporation if the $780,000,000 cash offer is accepted by Toga Corporation.
c. Explain why the goodwill determined in part b was not included on Toga Corporation's balance sheet.