Special Snowflakes, Inc. acquires 100% of the outstanding shares of Unicorn Corp
ID: 2802165 • Letter: S
Question
Special Snowflakes, Inc. acquires 100% of the outstanding shares of Unicorn Corp. for $2,450,000 and accounts for the transaction using the purchase method. Unicorn’s balance sheet at the acquisition date is as follows:
Unicorn, Corp.
Balance Sheet
Acquisition Date
Historical
Cost
Current
Market
Value
Assets
Current Assets
$ 900,000
$ 800,000
Depreciable Assets less Accumulated Depreciation
$ 875,000
$1,250,000
Goodwill
Total Assets
$1,775,000
Liabilities and Equities
Liabilities
$1,100,000
$1,200,000
Deferred Income Tax Liability
$ 125,000
$ 125,000
Shareholders' Equity
$ 550,000
Total Liabilities and Equities
$1,775,000
Based on the information concerning Unicorn Corp. what is the value of the goodwill related to the acquisition that Special Snowflakes will initially record?
Unicorn, Corp.
Balance Sheet
Acquisition Date
Historical
Cost
Current
Market
Value
Assets
Current Assets
$ 900,000
$ 800,000
Depreciable Assets less Accumulated Depreciation
$ 875,000
$1,250,000
Goodwill
Total Assets
$1,775,000
Liabilities and Equities
Liabilities
$1,100,000
$1,200,000
Deferred Income Tax Liability
$ 125,000
$ 125,000
Shareholders' Equity
$ 550,000
Total Liabilities and Equities
$1,775,000
Explanation / Answer
value of the goodwill related to the acquisition that Special Snowflakes will initially record:
Liabilities at book value : $11,00,000
Add: Bussiness purchase cost : $24,50,000
Less: Total Assets at book value : ($17,75,000)
Goodwill $17,75,000
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