**Business Acquisition Analysis**On January 1, 2019, Company X acquired 80% of Company Y's common stock for $150,000. On the same day, Company Y's net assets amounted to $140,000. The fair value of assets and liabilities were equal on the acquisition date. For the year ending December 31, 2019, Company Y reported an income of $50,000 and declared a dividend of $30,000. Company X utilizes the equity method in accounting.**Question:**What is the goodwill balance on January 1, 2019?**Options:**- a. $10,000- b. $47,500- c. $37,500- d. $50,000**Explanation of Calculation:**To determine the goodwill, we follow these steps:1. **Calculate the fair value of the net assets acquired:** - Net assets of Company Y: $140,000 - Percentage acquired by Company X: 80% - Value of net assets acquired: 0.80 * $140,000 = $112,0002. **Determine the purchase consideration:** - Amount paid by Company X for 80% of Company Y: $150,0003. **Calculate the goodwill:** - Goodwill is the excess of the purchase consideration over the fair value of the net assets acquired. - Goodwill = Purchase consideration - Fair value of net assets acquired - Goodwill = $150,000 - $112,000 = $38,000However, none of the options provided exactly match the calculated goodwill amount of $38,000.**Interactive Question:**Please select the option closest to the calculated goodwill balance:- a. $10,000- b. $47,500- c. $37,500- d. $50,000**Answer:**The correct answer, based on the nearest value to the calculated goodwill of $38,000, is **c. $37,500.**

Goodwill = Purchase consideration - Fair value of net assets where, Purchase consideration = Amount…

on 1/1/2019 X CO acquired 80% of Y common stock for $150,000 in the same day the y net assets was $ 140,000 ,in the same date the fair value of assets and liabilities were equal .year ended 31/12/2019 y reported income $50,000 , declared dividend $30,000 ,X using equity methods what is good will balance on 1/1/2019 Select one: a. 10,000 b. 47,500 c. 37,500 d. 50,000

on 1/1/2019 X CO acquired 80% of Y common stock for $150,000 in the same day the y net assets was $ 140,000 ,in the same date the fair value of assets and liabilities were equal .year ended 31/12/2019 y reported income $50,000 , declared dividend $30,000 ,X using equity methods what is good will balance on 1/1/2019 Select one: a. 10,000 b. 47,500 c. 37,500 d. 50,000

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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