New Harvest Bakery acquired all the outstanding common stock of Red Rock Bakery for $72,800 in cash. The book values and fair values of Red Rock's assets and liabilities were as follows: Book Value Fair Value $25,100 43,900 4,900 18,000 25,600 Current assets Property, plant, and equipment Other assets Current liabilities Long-term liabilities $23,900 50,400 5,700 14,600 20,500 Calculate the amount paid for goodwill. Goodwill
New Harvest Bakery acquired all the outstanding common stock of Red Rock Bakery for $72,800 in cash. The book values and fair values of Red Rock's assets and liabilities were as follows: Book Value Fair Value $25,100 43,900 4,900 18,000 25,600 Current assets Property, plant, and equipment Other assets Current liabilities Long-term liabilities $23,900 50,400 5,700 14,600 20,500 Calculate the amount paid for goodwill. Goodwill
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![**New Harvest Bakery Acquisition Analysis**
New Harvest Bakery acquired all the outstanding common stock of Red Rock Bakery for $72,800 in cash. Below are the book values and fair values of Red Rock's assets and liabilities:
| | **Book Value** | **Fair Value** |
|------------------------------|----------------|----------------|
| **Current assets** | $25,100 | $23,900 |
| **Property, plant, and equipment** | $43,900 | $50,400 |
| **Other assets** | $4,900 | $5,700 |
| **Current liabilities** | $18,000 | $14,600 |
| **Long-term liabilities** | $25,600 | $20,500 |
**Calculate the Amount Paid for Goodwill**
To calculate the goodwill, use the following formula:
\[ \text{Goodwill} = \text{Purchase Price} - (\text{Fair Value of Assets} - \text{Fair Value of Liabilities}) \]
**Assets and Liabilities Overview:**
- **Current Assets:** Booked at $25,100, with a fair market value of $23,900.
- **Property, Plant, and Equipment:** Initially valued at $43,900, with a fair value increase to $50,400.
- **Other Assets:** Listed at $4,900, whereas fair value stands at $5,700.
- **Current Liabilities:** Recorded at $18,000; fair value is lower at $14,600.
- **Long-term Liabilities:** Initially $25,600, reduced to a fair value of $20,500.
For detailed calculation instructions and concepts, they can be explored further in accounting and finance resources on goodwill and acquisition methods.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffbd2edfa-ebf7-4438-babc-36cc5ae93bbd%2Fc8d893c8-853e-4ef3-b8ca-820290f3b1ec%2Fkr52l1_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**New Harvest Bakery Acquisition Analysis**
New Harvest Bakery acquired all the outstanding common stock of Red Rock Bakery for $72,800 in cash. Below are the book values and fair values of Red Rock's assets and liabilities:
| | **Book Value** | **Fair Value** |
|------------------------------|----------------|----------------|
| **Current assets** | $25,100 | $23,900 |
| **Property, plant, and equipment** | $43,900 | $50,400 |
| **Other assets** | $4,900 | $5,700 |
| **Current liabilities** | $18,000 | $14,600 |
| **Long-term liabilities** | $25,600 | $20,500 |
**Calculate the Amount Paid for Goodwill**
To calculate the goodwill, use the following formula:
\[ \text{Goodwill} = \text{Purchase Price} - (\text{Fair Value of Assets} - \text{Fair Value of Liabilities}) \]
**Assets and Liabilities Overview:**
- **Current Assets:** Booked at $25,100, with a fair market value of $23,900.
- **Property, Plant, and Equipment:** Initially valued at $43,900, with a fair value increase to $50,400.
- **Other Assets:** Listed at $4,900, whereas fair value stands at $5,700.
- **Current Liabilities:** Recorded at $18,000; fair value is lower at $14,600.
- **Long-term Liabilities:** Initially $25,600, reduced to a fair value of $20,500.
For detailed calculation instructions and concepts, they can be explored further in accounting and finance resources on goodwill and acquisition methods.
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