5 points On January 10th p Company paid 2000000 for all the

5 points On January 10th, p Company paid $2.000,.000 for all the issued and outstanding common stock of s Company in a transaction pr for as an acquisition. The book values and fair values of S Company\'s assets and liabilities on January 10th were as follows: Cash Receivables (net) inventory Plant and equipment (net) Liabilities Net assets Book Value 5 200,000 190,000 Fair Value S 200,000 190,000 250,000 875,000 275,000 750,000 (350,000) $1.165.000 1,065,000 What is the amount of goodwill resulting from the business combination? 390.000 B.5835,000 @?.so. D.$935,00

Solution

Acqisition in the nature of Purchase :-

On the basis of fair values the values of individual assets are taken.

when the consideration is higher than the net Assets value \"Goodwill\" is araised.

Consideration paid = $2,000,000

Net Assets value = $1,165,000

The differnce between Consideration paid & Net Assets = $2,000,000 - $1,165,000 = $835,000. -  Option - B