Copyright

On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney...

Question:

On March 31, 2016, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows:

Book ValueFair Value
Current assets$6,000,000$7,500,000
Property, plant, and equipment$11,000,000$14,000,000
Other assets$1,000,000$1,500,000
Current liabilities$4,000,000$4,000,000
Long-term liabilities$6,000,000$5,500,000

Calculate the amount paid for goodwill.

Goodwill:

In financial accounting, goodwill refers to an intangible asset that is created when a business acquires another business entity. Goodwill is the difference between the price paid for the business and its market value.

Answer and Explanation: 1

Total fair value of assets = Current assets + Property, plant, and equipment + Other assets

Total fair value of assets = $7,500,000 + $14,000,000 + $1,500,000

Total fair value of assets = $23,000,000


Total fair value of liabilities = Current liabilities + Long-term liabilities

Total fair value of liabilities = $4,000,000 + $5,500,000

Total fair value of liabilities = $9,500,000


Fair value of net assets = Total fair value of assets - Total fair value of liabilities

Fair value of net assets = $23,000,000 - $9,500,000

Fair value of net assets = $13,500,000


Goodwill = Amount paid to acquire the common stock - Fair value of net assets

Goodwill = $17,000,000 - $13,500,000

Goodwill = $3,500,000


Learn more about this topic:

Loading...
What Are Intangible Assets? - Definition & Types

from

Chapter 9 / Lesson 12
4.6K

Determine how to separate intangible assets from tangible assets. Intangible assets are those that include goodwill, patents, and copyrights. Also find out more about how to classify an intangible asset as definite or indefinite.


Related to this Question

Explore our homework questions and answers library