(a) The purchase price above which Peach would record goodwill. (b) the purchse
ID: 2610428 • Letter: #
Question
(a)
The purchase price above which Peach would record goodwill.
(b) the purchse price below which the equipment would be recorded at less than its fair market value.
(c) the purchse price below which peach would record an extradonary gain.
(d) the purchse price below which peach would obtain a "bargian"
(e) the purchse price at which Peach would record $50,000 of goodwell
The following balance sheets were reported on January 1, 2014, for Peach Company and Stream Company:Peach Stream Cash $100,000 $20,000 Inventory 300,000 100,000 Equipment (net) 880,000 380,000 Total $1,280,000 500,000 Total Liabilities $300,000 $100,000 Common stock, $20 par value 400,000 200,000 Other contributed capital 250,000 70,000 Retained earnings 330,000 130,000 Total $1,280,000 $500,000
Appraisals reveal that the inventory has a fair value of $120,000, and the equipment has a current value of $410,000. The book value and fair value of liabilities are the same. Assuming that Peach Company wishes to acquire Stream for cash in an asset acquisition, determine the following cutoff amounts:
Explanation / Answer
B.the purchase price below which the equipment would be recorded at less than its fair market value.
IT is because as per accounting standards the valuation of inventory and equipment should be recorded as lower of Fair Market value or Book Value.there is no such thing called extraodinarygain and bargain as perthis accounting standards not even goodwill because the extra $50,000 recieved after acquiring Peach is not bacause of its goodwill but because of the valuation of the inventory and equipment at lower of cost or net realisable value.
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