Positivism Corporation paid $150,000 for an 30% interest in Science Tech Corporation on January 1, 20X1 when the stockholders' equity of Science Tech consisted of $200,000 capital stock and $160,000 retained earnings. The following assets of Science Tech had fair values different from their book values when Positivism acquired its interest: Book Value Fair Value Inventories (sold in 20X1) $ 50,000 $ 60,000 Equipment (8-year life at the time of combination) Bonds Payable (matures 12/31/X5) 600,000 (500,000) 640,000 (525,000) During 20X1, Science Tech’s reported net income was $50,000 and dividends declared and paid were $10,000. 1. Calculate Excess/Difference: 2. Calculate Goodwill

Positivism Corporation paid $150,000 for an 30% interest in Science Tech Corporation on January 1, 20X1 when the stockholders' equity of Science Tech consisted of $200,000 capital stock and $160,000 retained earnings. The following assets of Science Tech had fair values different from their book values when Positivism acquired its interest: Book Value Fair Value Inventories (sold in 20X1) $ 50,000 $ 60,000 Equipment (8-year life at the time of combination) Bonds Payable (matures 12/31/X5) 600,000 (500,000) 640,000 (525,000) During 20X1, Science Tech’s reported net income was $50,000 and dividends declared and paid were $10,000. 1. Calculate Excess/Difference: 2. Calculate Goodwill

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 1BCRQ

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Concept explainers

Consolidation

Consolidation in general examination implies an asset oscillating between well-defined methods of trading status. Consolidation is commonly known as market indecisiveness, which completes when the asset's values move forward or backward the trading structure.

Question

Book Value

Fair Value

Inventories (sold in 20X1)

$ 50,000

$ 60,000

Equipment (8-year life at the time of combination)

Bonds Payable (matures 12/31/X5)

600,000

(500,000)

640,000

(525,000)

During 20X1, Science Tech’s reported net income was $50,000 and dividends declared and paid were $10,000.

1. Calculate Excess/Difference:

2. Calculate Goodwill

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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