How much is the goodwill (gain on bargain ourchase)? 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 forlegal, accounting and consultancy fees in negotiating the business combination. ABC Co. elected to measure NCI at the NCI'sproportionate share in XYZ, Inc.'s identifiable net assets. The carrying amounts and fair values of XYZ's assets and liabilities at theacquisition date were as follows:Carrying amountsFair valuesAssetsCash in bank25,00025,000Accounts receivable425,000300,000Inventory1,300,000875,000Equipment – net2,500,0002,750,000Goodwill250,00050,0004,000,000Total assets4,500,000LiabilitiesPayables1,000,0001,000,000How much is the goodwill (gain on a bargain purchase)?

Calculation of Net Assets - Fair value: = Total Assets - Goodwill - Liabilities = P4,000,000 -…

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How much is the goodwill (gain on bargain ourchase)?

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

How much is the goodwill (gain on bargain ourchase)?

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).

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