DOL Co had the following account balances as of December 1 2

DOL Co. had the following account balances as of December 1, 2015:

Inventory $720,000

Land 600,000

Building—net (valued at $1,200,000) 1,080,000

Common stock ($10 par value) 960,000

Retained earnings, December 1, 2010 1,320,000

Revenues 720,000

Expenses 600,000

Miller Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued $30 par value common stock (valued at $90 per share) to acquire all of DOL’s outstanding common stock.

Assume that Miller paid cash of $2.8 million. No stock is issued. An additional $50,000 is paid in direct combination costs.

For Goodwill, determine what balance would be included in a December 1, 2015 consolidation?

Solution

Total fair value of assets acquired =total assets + revaluation increase

2,400,000 + 120,000 = 2,520,000

Total consideration paid = 1,700,000 + 12000 shares X 90 per share

1,700,000 + 1,080,000 = $ 2,780,000

Goodwill = 2,780,000 - 2,520,000 = $ 260,000

If all cash given and extra cash for covering cost than consideration =

2,800,000 + 50,000 = $ 2,850,000

Total fair value of assets = $ 2,520,000

Goodwill = $ 3,30,000.