Computation of goodwillAssume that an investor purchases 100% of an investee company for $24 million in a transaction that qualifies as a business combination. The fair values of the identifiable net assets areas follows:Tangible net assets:Receivables, inventories, PPE, payables, and accruals$8 millionIntangible assets:Patents, customer lists, trade name, software, etc.5 millionResearch and development assets: Research projects in process at the investee company 6 millionIn addition to the purchase price, the Investor also incurs acquísition-related costs amounting to $1.8 million for professional fees and the internal allocation of overhead relating to thepurchase.a. How much of the purchase price is assigned to Goodwill?$4million

Goodwill is calculated by subtracting the difference between a company's assets and liabilities from…

sume that an Investor purchases 100% of an investee company for $24 million in a transaction that qualifies as a business combination. follows: Receivables, Inventories, PPE, payables, and accruals $8 million 5 million esearch and development assets: Research projects in process at the investee company 6 million angible net assets: tangible assets: Patents, customer lists, trade name, software, etc. addition to the purchase price, the Investor also incurs acquisition-related costs amounting to $1.8 million for professional fees and the in urchase.

sume that an Investor purchases 100% of an investee company for $24 million in a transaction that qualifies as a business combination. follows: Receivables, Inventories, PPE, payables, and accruals $8 million 5 million esearch and development assets: Research projects in process at the investee company 6 million angible net assets: tangible assets: Patents, customer lists, trade name, software, etc. addition to the purchase price, the Investor also incurs acquisition-related costs amounting to $1.8 million for professional fees and the in urchase.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.1AP

See similar textbooks

Similar questions

The partners of the Liwa Engineering Company have decided to terminate the business. The balances of the company's accounts prior to the liquidation are given in the Table 1. Table 1 Book value in OMR Cash 28,500 Plant assets (net) 75,000 Machinery and equipment (net) 2,500 Inventories 1,300 Liabilities 47,300 Capital, Partner 1 36,000 Capital, Partner 2 24,000 Additional information: The partner 1 and the partner 2 share profits and losses in the ratio 7:3. In the process of liquidation, the non-cash assets are sold for OMR 125,000. Required: A. You are asked to prepare a schedule of cash payments (Table 2), showing how cash will be distributed between the partners as it becomes available. B. Based on the information above (Table 2 – Schedule of Cash Payments), journalize the transactions.
1. ANEMONE Company engaged your services to compute the goodwill in the purchase of another company which provided the following: Net income Net assets 2018 P 2,000,000 P 7,800,000 2019 2,500,000 8,700,000 2020 3,900,000 9,000,000 Goodwill is measured by capitalizing excess earnings at 25% with normal on average net assets at 20% How much is the goodwill?
Computing the amount of goodwill in an acquisition On July 1, 2022 an investor paid $3,330,000 for 100% of the voting common stock of an investee. The transaction qualifies as a business combination. At that time, investee had the following summarized balance sheet information: July 1, 2022 $450,000 Current assets Plant and equipment, net 2,520,000 Liabilities 1.260,000 Equity 1,710,000 On July 1, 2022, the fair value of the plant and equipment was $630,000 more than its carrying amount. The acquisition-date fair values approximated their recorded book values for all of the remaining individual net assets of the investee. Related to this transaction, what amount of goodwill must the investor report in its post-acquisition consolidated balance sheet on July 1, 20227 $630,000 O$1,620,000 O$990,000 O$2,250,000
If the company's assets in TL: cash 100.000, accounts receivable 50.000, inventory 150.000, and building 200.000 (market value 300.000) and the liabilities 300.000. If the price paid to acquire company 400.000 TL, how much is the goodwill under market value approach? Select one: a. 100.000 b. 300.000 c. 200.000 d. 150.000
Topic: Intangible Assets (Goodwill) England Company assembled the following data relative to a certain entity in determining the amount to be paid for net assets and goodwill: Assets at fair value before goodwill 2,600,000 Liabilities 900,000 Shareholders' Equity 1,700,000 Net Earnings after elimination of unusual or infrequent items: 2017 200,000 2018 230,000 2019 300,000 2020 250,000 2021 270,000 Required: Calculate the amount of goodwill under the following: 1. Average earnings are capitalized at 10%. 2. A return of 8% is considered normal on net assets at fair value. Excess earnings are capitalized at 15%. 3. A return of 10% is considered normal on net assets at fair value. Goodwill is measured at 5 years excess earnings. 4. A return of 10% is considered…
Calculate the total goodwill for a pro forma balance sheet given the following details. Details: Equity purchase price: $2,000 Book value: $1,700 Existing goodwill: $100 A. $100 B. $300 C. $200 D. $400
Noncurrent Asset Held for Sale The statement of financial position of an entity on December 31, 20x1 shows the following information: Cash and cash equivalents 600,000 Trade and other receivables 1,200,000 Inventories 3,600,000 Investment property (Cost model) 1,400,000 Investment in associate 800,000 Property, plant and equipment 5,000,000 Total assets 12,600,000 Trade and other payables 4,900,000 Current tax payable 1,800,000 Deferred tax liability 700,000 Ordinary share capital 2,000,000 Retained earnings 2,700,000 Other components of equity 500,000 Total liabilities & equity 12,600,000 On December 31, 20x1, the entity commits to a plan to sell the investment property. All conditions of PFRS 5 are met. The fair value of the investment property on this date is P1,600,000 while the estimate of costs to sell is P50,000. Requirement: Prepare the classified statement of financial position of the entity as at December 31, 20x1.
Noncurrent Asset Held for Sale The statement of financial position of an entity on December 31, 20x1 shows the following information: Cash and cash equivalents 600,000 Trade and other receivables 1,200,000 Inventories 3,600,000 Investment property (Cost model) 1,400,000 Investment in associate 800,000 Property, plant and equipment 5,000,000 Total assets 12,600,000 Trade and other payables 4,900,000 Current tax payable 1,800,000 Deferred tax liability 700,000 Ordinary share capital 2,000,000 Retained earnings 2,700,000 Other components of equity 500,000 Total liabilities & equity 12,600,000 On December 31, 20x1, the entity commits to a plan to sell the investment property. All conditions of PFRS 5 are met. The fair value of the investment property on this date is P1,600,000 while the estimate of costs to sell is P50,000. Explain why is it considered as a noncurrent asset held for sale. And what should be the journal entry
Exchange of Similar Assets On May 1, 2021, Equipment with a Cost of $50,000 and Accumulated Depreciation of $40,000 is exchanged for similar Equipment with a cost of $60,000 and a trade in allowance of $15,000. What is the amount of the Gain or Loss on the Exchange? Gain of $5,000 ObLoss of $5,000 Gain of $10,000 Od Loss of $10,000
Chapter : Goodwill On January 1, 2021, PT Nain purchased the net asset of PT Wuna which will be an additional division of PT Wuna. As of December 31, 2020, below is the book value of PT Wuna: PT Nain hires Indah Public Appraisal Service Office to calculate the fair value of PT Wuna. The appraiser's report shows that 10% of accounts receivable are uncollectible, the value of stock investment has increased by 25%, inventories are having obsolescence by 10%, while the company's fixed assets are understated by 200,000. Instructions: a. On December 31, 2021, the balance of net assets for Wuna division (including goodwill) amounted to $3.500.000. Company estimates that the present value of net cash flows from Wuna division is $3.350.000. While the fair value less cost to sell is $3.250.000. Prepare the journal entry regarding the situation!
Chapter : Goodwill On January 1, 2021, PT Nain purchased the net asset of PT Wuna which will be an additional division of PT Wuna. As of December 31, 2020, below is the book value of PT Wuna: PT Nain hires Indah Public Appraisal Service Office to calculate the fair value of PT Wuna. The appraiser's report shows that 10% of accounts receivable are uncollectible, the value of stock investment has increased by 25%, inventories are having obsolescence by 10%, while the company's fixed assets are understated by 200,000. Instructions: a. Calculate the amount of Goodwill that occured from the transaction above and prepare the journal entry if the consideration given is: $4.000.000! b. Company estimates that the useful life of goodwill is 18 years. Prepare the journal entry in regard to the information! c. On December 31, 2021, the balance of net assets for Wuna division (including goodwill) amounted to $3.500.000. Company estimates that the present value of net cash flows from Wuna…
Topic: Intangible Assets (Goodwill) Guinevere Company is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of entity at current year end was P10,000,000. What is the amount of goodwill if: 1. Excess earnings are purchased for 5 years? A. 8,000,000 B. 4,000,000 C. 5,000,000 D. 4,500,000 2. Excess earnings are capitalized at 25%? A. 7,200,000 B. 6,400,000 C. 8,000,000 D. 3,600,000 3. Annual average earnings are purchased for 3 years? A. 10,800,000 B. 18,000,000 C. 4,800,000 D. 5,400,000 4. Annual average earnings are capitalized at 25%? A. 1,600,000 B. 3,600,000 C. 4,400,000 D. 2,000,000 5. Excess earnings are discounted at 12% for 5 years? (the PV of an ordinary annuity of 1 for 5 years at 12% is 3.60) A. 12,960,000 B. 10,800,000 C. 5,760,000 D. 7,200,000