On July 1, 20X9, Link Corporation paid $340,000 for all of Tinsel Company\'s out

Question

On July 1, 20X9, Link Corporation paid $340,000 for all of Tinsel Company's outstanding common stock. On that date, the costs and fair values of Tinsel's recorded assets and liabilities were as follows:

Based on the preceding information, the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination is:

$0.

$25,000.

$70,000.

$45,000.

Based on the preceding information, what amount should be allocated to goodwill in the consolidated balance sheet, prepared after this business combination?

$0

$25,000

$70,000

$45,000

Cost Fair Value Cash and Receivables $50,000 $50,000 Inventory 120,000 125,000 Buildings and Equipment (net) 200,000 240,000 Liabilities   (100,000)   (100,000) Net assets    $270,000    $315,000

Explanation / Answer

Differential reflected in a consolidation worksheet is $45000(315000-270000).

Amount should be allocated to goodwill in the consolidated balance sheet is $25000(340000-315000).

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