Compute the goodwil (gain on bargain purchase) On January 1, 2021, Grey Co. Acquires 80% of the outstanding voting shares of Cristine Corp. Cristine Corp.'sidentifiable assets and liabilities have fair values of P3,400,000 and P1,700,000, respectively. Relevant informationfollows:> Grey Co. Agrees to pay Cristine's former owners P2,000,000 cash, half of which is to be paid on January 1,2021, while the other half will be paid in five equal annual installments starting December31, 2021. Thecurrent market rate of interest on January 1, 2021 is 12%> Grey Co. Also agrees to provide a technical know-how to be used in Cristine's operations after the businesscombination. The technical know-how has a fair value of P200,000Grey Co. Opts to measure the non-controlling interest at the NCI's proportionate share in Cristine's netidentifiable assetsCompute the goodwill (gain on bargain purchase).

Goodwill refers to the extra amount of consideration paid over the fair value of the net assets of…

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Business

Accounting

Compute the goodwil (gain on bargain purchase)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Compute the goodwil (gain on bargain purchase)

On January 1, 2021, Grey Co. Acquires 80% of the outstanding voting shares of Cristine Corp. Cristine Corp.'s
identifiable assets and liabilities have fair values of P3,400,000 and P1,700,000, respectively. Relevant information
follows:
> Grey Co. Agrees to pay Cristine's former owners P2,000,000 cash, half of which is to be paid on January 1,
2021, while the other half will be paid in five equal annual installments starting December31, 2021. The
current market rate of interest on January 1, 2021 is 12%
> Grey Co. Also agrees to provide a technical know-how to be used in Cristine's operations after the business
combination. The technical know-how has a fair value of P200,000
Grey Co. Opts to measure the non-controlling interest at the NCI's proportionate share in Cristine's net
identifiable assets
Compute the goodwill (gain on bargain purchase).

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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