Financial Accounting
3rd Edition
ISBN: 9780078025549
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Question
Chapter 7, Problem 7.3AP
Requirement (1)
To determine
Goodwill is an intangible asset. It is defined as the excess of cost of an acquired company over the fair value of its net assets. Net assets are the difference between the total assets and the total liabilities. The value of the goodwill is the unique features of the company such as the location of the company, its efficient employees, and its reputation, which cannot be associated with any specific asset of the Company. It arises when one company purchases or acquires another company.
To calculate: The amount that Company FC should report for goodwill.
Requirement 2
To determine
Acquisition Cost:
Acquisition cost is the total cost of the asset incurred to obtain an asset. Acquisition cost is also called as historical cost or original cost.
To record: the acquisition made by Company FC
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Exercise 7-6 (Algo) Calculate the amount of goodwill (LO7-2)
Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $44,000,000 in cash.
The book values and fair values of Iceberg's assets and liabilities were as follows:
Current assets
Property, plant, and equipment
Other assets
Current liabilities
Long-term liabilities
Required:
Book Value
$ 16,000,000
30,800,000
5,200,000
9,600,000
16,400,000
Fair Value
$ 19,000,000
36,800,000
6,200,000
9,600,000
15,400,000
Calculate the amount paid for goodwill. (Enter your answer in millions (i.e. 5,000,000 should be entered as 5).)
Amount paid for goodwill
million
ABC Corporation purchased XYZ Inc. The latter has the following account balances:
The noncurrent assets have a fair value of P4,500,000. ABC paid the owners of XYZ a total purchase price of P4,500,000. How much is the goodwill that ABC should record from this acquisition?
*refer to attached photo
5
Chapter 7 Solutions
Financial Accounting
Ch. 7 - Prob. 1RQCh. 7 - What are the two major categories of long-term...Ch. 7 - Prob. 3RQCh. 7 - Prob. 4RQCh. 7 - Prob. 5RQCh. 7 - Prob. 6RQCh. 7 - Equipment includes machinery used in manufacturing...Ch. 7 - Prob. 8RQCh. 7 - Prob. 9RQCh. 7 - Prob. 10RQ
Ch. 7 - Prob. 11RQCh. 7 - How do we decide whether to capitalize (record as...Ch. 7 - Explain the usual accounting treatment for repairs...Ch. 7 - Prob. 14RQCh. 7 - How is the dictionary definition different from...Ch. 7 - What factors must we estimate in allocating the...Ch. 7 - Prob. 17RQCh. 7 - Prob. 18RQCh. 7 - Prob. 19RQCh. 7 - Assume that Little King Sandwiches uses...Ch. 7 - Assume Little King Sandwiches depreciates a...Ch. 7 - Prob. 22RQCh. 7 - Prob. 23RQCh. 7 - What is book value? How do we compute the gain or...Ch. 7 - Prob. 25RQCh. 7 - Prob. 26RQCh. 7 - Prob. 27RQCh. 7 - Prob. 28RQCh. 7 - Determine the initial cost of land (LO71) Fresh...Ch. 7 - Prob. 7.2BECh. 7 - Prob. 7.3BECh. 7 - Compute research and development expense (LO72)...Ch. 7 - Prob. 7.5BECh. 7 - Explain the accounting definition of depreciation...Ch. 7 - BE7–7 El Tapitio purchased restaurant furniture on...Ch. 7 - Prob. 7.8BECh. 7 - Prob. 7.9BECh. 7 - Account for the sale of long-term assets (LO76)...Ch. 7 - Account for the exchange of long-term assets...Ch. 7 - Account for the exchange of long-term assets...Ch. 7 - Prob. 7.13BECh. 7 - Determine the impairment loss (LO78) Vegetarian...Ch. 7 - Prob. 7.15BECh. 7 - McCoys Fish House purchases a tract of land and an...Ch. 7 - Orion Flour Mills purchased a new machine and made...Ch. 7 - Prob. 7.3ECh. 7 - Prob. 7.4ECh. 7 - Prob. 7.5ECh. 7 - Prob. 7.6ECh. 7 - Prob. 7.7ECh. 7 - Prob. 7.8ECh. 7 - Prob. 7.9ECh. 7 - Determine depreciation for the first year under...Ch. 7 - Deformine depreciation under three methods (LO74)...Ch. 7 - E7–12 Togo’s Sandwiches acquired equipment on...Ch. 7 - E7–13 Tasty Subs acquired a delivery truck on...Ch. 7 - Prob. 7.14ECh. 7 - Prob. 7.15ECh. 7 - Prob. 7.16ECh. 7 - Record the sole of equipment (L076) Abbott...Ch. 7 - Prob. 7.18ECh. 7 - Prob. 7.19ECh. 7 - Prob. 7.20ECh. 7 - The Italian Bread Company purchased land as a...Ch. 7 - Prob. 7.2APCh. 7 - Prob. 7.3APCh. 7 - Prob. 7.4APCh. 7 - Determine depreciation under three methods (LO74)...Ch. 7 - Prob. 7.6APCh. 7 - Prob. 7.7APCh. 7 - Prob. 7.8APCh. 7 - Prob. 7.9APCh. 7 - Calculate and interpret ratios (LO77) University...Ch. 7 - Prob. 7.1BPCh. 7 - Determine the acquisition cost of equipment (LO71)...Ch. 7 - Prob. 7.3BPCh. 7 - Prob. 7.4BPCh. 7 - Determine depreciation under three methods (LO74)...Ch. 7 - Prob. 7.6BPCh. 7 - Prob. 7.7BPCh. 7 - Record the disposal of equipment (LO76) Flip Side...Ch. 7 - Prob. 7.9BPCh. 7 - Calculate and interpret ratios (LO77) Barry...Ch. 7 - Prob. 7.1APCPCh. 7 - Prob. 7.2APFACh. 7 - Prob. 7.3APFACh. 7 - Prob. 7.4APCACh. 7 - Prob. 7.5APECh. 7 - Written Communication At a recent luncheon, you...Ch. 7 - Earnings Management Edward L. Vincent is CFO of...
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- Kiwi Co. purchased another entity for P5,000,000 cash. The carrying amount and fair value were associated with this acquisition: Carrying Fair value amount Accounts receivable 2,000,000 2,000,000 Inventory 1,000,000 500,000 Government contract 1,000,000 Equipment Short-term loan payable 400,000 500,000 (2,000,000) 1,400,000 (2,000,000) Net assets 20,000,000 The fair value associated with the acquired entity's government contract is not based on any legal or contractual relationship. In addition, for obvious reason, there is no open market trading for an intangible of this sort. What is the goodwill arising from the acquisition?arrow_forwardces Mc Graw Hill Problem 7-3B (Algo) Calculate and record goodwill (LO7-2) Northern Equipment Corporation purchased all the outstanding common stock of Pioneer Equipment Rental for $5,590,000 in cash. The book values and fair values of Pioneer's assets and liabilities were as follows: Accounts Receivable $ 740,000 Book Value Fair Value $ 640,000 Buildings 4,090,000 4,790,000 Equipment 100,000 190,000 Accounts Payable (760,000) (760,000) $ $ Net assets 4,170,000 4,860,000 Required: 1. Calculate the amount Northern Equipment should report for goodwill. 2. Record Northern Equipment's acquisition of Pioneer Equipment Rental. Complete this question by entering your answers in the tabs below. Required Required 1 2 Record Northern Equipment's acquisition of Pioneer Equipment Rental. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet < 1 Record the acquisition of Pioneer Equipment…arrow_forwardColumbia recently acquired all of Mercury's net assets in a business acquisition. The cash purchase price was $22,000,000. Mercury's assests and liabilites had the following costs and appraised values: Current assets Land, building and equipment Current liabilites Mortgage payable How much goodwill will rewult from this transaction? Cost Basis $ 6,000,000 $ 14,000,000 Appraised Value $ 6,000,000 $23,000,000 $4,000,000 $4,000,000 $ 10,000,000 $10,000,000arrow_forward
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