Fizzy Cola acquires Juicee Ltd. for $25,000,000 in cash, and accounts for its in
ID: 2336300 • Letter: F
Question
Fizzy Cola acquires Juicee Ltd. for $25,000,000 in cash, and accounts for its investment as a merger. Juicee's balance sheet at the date of acquisition is as follows: Current assets...$100,000 Property, net.....$4,000,000 TOTAL $4,100,000 Liabilities $3,000,000 Equity $1,100,000 TOTAL $4,100,000 The fair value of Juicee's current assets is $75,000 less than book value. The fair value of its property is $1,500,000 less than book value. The book value of its liabilities approximates fair value. There are no unreported assets or liabilities. How much goodwill does Fizzy report for this acquisition? a. $19,475,000 b. $22,325,000 c. $22,475,000 d. $25,475,000 ***PROVIDE DETAIL
Explanation / Answer
Solution : answer is d.$25,475,000
Explanation:
Net assets = current assets + property - liabilities
= ($100,000 - 75,000) + ($4,000,000 - $1,500,000) - $3,000,000
= - $475,000
Goodwill = purchase consideration - net assets
= $25,000,000 - (- 475,000)
= $25,475,000
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