mework On June 1, Cline Co. paid $1,098,500 cash for all of the issued and outst

Question

mework On June 1, Cline Co. paid $1,098,500 cash for all of the issued and outstanding common stock of Renn Corp The carying amounts for Renn's assets and liabilities on June 1 follow Cash Accounts receivable Capitalized software costs Goodwil1 Liabilities Net assets 223,000 232,500 362,000 182,000 (137,000) $862,500 On June 1, Renn's accounts recelvable had a fair value of $189,000. Additionally, Renn's in-process research and development was estimated to have a fair value of $288,000. All other items were stated at their fair values. On Cline's June 1 consolidated balance sheet, how much is reported for goodwill? Multiple Choice $52,000. Prev 6 of 10l Next >

Explanation / Answer

Calculate the fair value of Renn Corp's net assets as follows:

Fair value of Renn Corp's net assets is $925,000.

Cash paid by Cline Co. is $1,098,500.

Therefore,

Goodwill to be reported on Cline's June 1 consolidated balance sheet = $1,098,500 - $925,000 = $173,500

Cash 223000 Accounts receivable 189000 Capitalized software costs 362000 Goodwill 0 in-process research and development 288000 Total fair value of Renn Corp's assets 1062000 Less: Fair value of liabilities 137000 Fair value of Renn Corp's net assets 925000

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