What’s the amount of the goodwill?
(7) H Co acquires S Co for $1,040,000 when the balances of share capital and retained profits of S Co amount to respectively $450,000 and $360,000. S Co holds two properties which are
assets of S Co, and resulting temporary differences are shown below:
All the timing differences are temporary differences. All the temporary differences are timing differences.
If the differences between the carrying amount of an asset or liability and its tax base
2
Carrying Amount $
Fair Value $
Tax base $
Property 1 Property 2 Other net assets Total
320,000 390,000 400,000 420,000 90,000 90,000 810,000 900,000
300,000 450,000 90,000 840,000
According to the tax rules, the tax bases of the net assets of S Co are not changed when the net assets are acquired by H Co. What’s the amount of the
A. $152,000
B. $140,000
C. $128,000
D. Nil
E. None of these answer choices are correct.
(8) Using the information of question (7), assuming according to the tax rules, the tax bases of the net assets of S Co are the fair value when the net assets are acquired by H Co.
A. $152,000
B. $140,000
C. $128,000
D. Nil
E. None of these answer choices are correct.
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