On July 1, 2015, Link Corporation paid $340,000 for all of Tinsel Company\'s out

Question

On July 1, 2015, 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 above information you are required

1.     To calculate the differential reflected in a consolidation worksheet to prepare a consolidated balance sheet immediately after the business combination.

2.     To calculate what amount should be allocated to goodwill in the consolidated balance sheet, prepared after this business combination.

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

Explanation / Answer

1...

340000 - 270000 = 70000

2...

340000 - 315000 = 25000

25000 is the goodwill in the consoliated balance sheet

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