The Hermanson and Jones Corporation purchased all of the outstanding common stoc

Question

The Hermanson and Jones Corporation purchased all of the outstanding common stock of Viacon Corporation for $25,000,000 in cash. The book value of Viacon’s net assets (assets minus liabilities) was $16,250,000. The fair values of all of Viacon’s assets and liabilities were equal to their book values with the following exceptions:

                                                                 Book Value           Fair Value

    Receivables                                          $3,000,000            $2,850,000

    Property, plant, and equipment           10,200,000            11,200,000

    Intangible assets                                          30,000              3,000,000

Required:

Calculate the amount paid for goodwill.

Explanation / Answer

Calculation of Goodwill Particulars Amount Amount Purchase Price $25,000,000 Less: Fair value of net assets        Book Value of net assets $16,250,000        Add: Fair Value in excess of book value:                    Property, Plant and Equipment $1,000,000                    Intangible assets $2,970,000        Less: Book Value in excess of fair value:                    Receivables ($150,000) $20,070,000 Goodwill $4,930,000

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.