Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 20X1. The
Question:
Bullen Inc. acquired 100% of the voting common stock of Vicker Inc. on January 1, 20X1. The book value and fair value of Vicker's accounts on that date (prior to creating the combination) follow, along with the book value of Bullen's accounts:
Bullen Book Value | Vicker Book Value | Vicker Fair Value | |
---|---|---|---|
Retained Earnings 1/1/X1 | $250,000 | $240,000 | |
Cash and Receivables | $170,000 | $70,000 | $70,000 |
Inventory | $230,000 | $170,000 | $210,000 |
Land | $280,000 | $220,000 | $240,000 |
Buildings (net) | $480,000 | $240,000 | $270,000 |
Equipment (net) | $120,000 | $90,000 | $90,000 |
Liabilities | $650,000 | $430,000 | $420,000 |
Common stock | $360,000 | $80,000 | |
Additional paid-in capital | $20,000 | $40,000 |
Assume that Bullen paid a total of $480,000 in cash for all of the shares of Vicker. In addition, Bullen paid $35,000 for secretarial and management time allocated to the acquisition transaction. What will be the balance in consolidated goodwill?
A. $0.
B. $20,000.
C. $35,000.
D. $55,000.
E. $65,000.
Goodwill is an asset presented in the balance sheet. This arises because of a business combination. Take note that only acquired goodwill can be presented in the balance sheet. To compute for the goodwill in a business combination, just deduct the fair value of identifiable net assets from the acquisition price.
Advanced Accounting
ISBN: 978-1934319307
2nd edition
Authors: Susan S. Hamlen, Ronald J. Huefner, James A. Largay III