Answered: (d) Determine the amount of goodwill…

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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The P Ltd acquires all issued capital of the S Ltd for a consideration of $1,000,000 cash and 800,000 shares each valued at $1.50. The summary statement of the financial position of the subsidiary company immediately following the acquisition is:

Fair value of assets acquired. $2,640,000
Fair value of liabilities acquired. $720,000
Total shareholders’ equity of the subsidiary company $800,000Retained earnings of the subsidiary company $1,120,000

(d) Determine the amount of goodwill (or bargain purchase) arising out of the acquisition if the purchase

consideration paid was $1,000,000 cash and 400,000 shares each valued at $1.50

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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