How much is the goodwill (gain on bargain ourchase)?
Transcribed Image Text:On January 1, 20x1, ABC Co. acquired 75% interest in XYZ, Inc. for P2,500,000 cash. ABC Co. incurred transaction costs of P250,000 for
legal, accounting and consultancy fees in negotiating the business combination. ABC Co. elected to measure NCI at the NCI's
proportionate share in XYZ, Inc.'s identifiable net assets. The carrying amounts and fair values of XYZ's assets and liabilities at the
acquisition date were as follows:
Carrying amounts
Fair values
Assets
Cash in bank
25,000
25,000
Accounts receivable
425,000
300,000
Inventory
1,300,000
875,000
Equipment – net
2,500,000
2,750,000
Goodwill
250,000
50,000
4,000,000
Total assets
4,500,000
Liabilities
Payables
1,000,000
1,000,000
How much is the goodwill (gain on a 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).
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
