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What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?

What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?

FINANCIAL ACCOUNTING
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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On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for impairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. $ 10,000 Soda Inc. $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $492,500 $ 45,500 $384,750 - $ 47,125 128,125 156,250 338,000 109,000 $492,500 53,250 $384,750 For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid dividends of $25,000. An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred. What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
Transcribed Image Text:On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for impairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. $ 10,000 Soda Inc. $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $492,500 $ 45,500 $384,750 - $ 47,125 128,125 156,250 338,000 109,000 $492,500 53,250 $384,750 For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid dividends of $25,000. An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred. What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
Multiple Choice о ($8,250) о $7,125 о $9,500 О $27,500
Transcribed Image Text:Multiple Choice о ($8,250) о $7,125 о $9,500 О $27,500
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