Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of $62,000 and net assets with a fair value of $211,000. Takeover Co. pays $304,000 for Target Co.'s net assets and business activities. Required: a. How much goodwill will result from this transaction? Goodwill b. Calculate the ROI for Target Co. based on its present operating income and the fair value of its net assets. (Round your percentage answer to 2 decimal places.)

Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of $62,000 and net assets with a fair value of $211,000. Takeover Co. pays $304,000 for Target Co.'s net assets and business activities. Required: a. How much goodwill will result from this transaction? Goodwill b. Calculate the ROI for Target Co. based on its present operating income and the fair value of its net assets. (Round your percentage answer to 2 decimal places.)

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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