On January 1, 2013, ABC Corporation spent $2,600,000 to acquire control over XYZ, Inc. This price was based on paying $750,000 for 30 percent of XYZ's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, XYZ's stockholders' equity accounts were as follows: Common stock (10 par value) $1,000,000 Preferred stock (7% fully participating, $100 par value) $1,000,000 Retained earnings $2,000,000 Required: 1) What is the total acquisition-date fair value of XYZ? 2) Assuming all accounts XYZ are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in XYZ?

On January 1, 2013, ABC Corporation spent $2,600,000 to acquire control over XYZ, Inc. This price was based on paying $750,000 for 30 percent of XYZ's preferred stock, and $1,850,000 for 80 percent of its outstanding common stock. As of the date of the acquisition, XYZ's stockholders' equity accounts were as follows: Common stock (10 par value) $1,000,000 Preferred stock (7% fully participating, $100 par value) $1,000,000 Retained earnings $2,000,000 Required: 1) What is the total acquisition-date fair value of XYZ? 2) Assuming all accounts XYZ are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in XYZ?

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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