In: Accounting
Peter acquires 100% of Saul for 5,254,360 in a tax-free business combination. The applicable income tax rate is 30%. Goodwill is not deductible for tax purposes. Based on the following information about the assets and liabilities of Sunfish, what amount should Porpoise record as goodwill for this acquisition on the date of acquisition?
Old book basis | Old tax basis | Fair value | |
Cash | $400,000 | $400,000 | $400,000 |
Equipment, net of depreciation | 500,000 | 200,000 | 750,000 |
Patents | 0 | 0 | 2,000,000 |
Goodwill | 80,000 | NA | ? |
Accounts payable | (300,000) | (300,000) | (300,000) |
Deferred income taxes payable | (90,000) | NA | ? |
Notes payable | (200,000) | (200,000) | (230,000) |
Old book basis | Old tax basis | Fair value | Temporary difference | ||||
Cash | 400,000 | 400,000 | 400,000 | - | |||
Equipment, net of depreciation | 500,000 | 200,000 | 750,000 | (550,000) | DTL | ||
Patents | - | - | 2,000,000 | (2,000,000) | DTL | ||
Goodwill | 80,000 | NA | ? | ||||
Accounts payable | (300,000) | (300,000) | (300,000) | ||||
Deferred income taxes payable | (90,000) | NA | ? | ||||
Notes payable | (200,000) | (200,000) | (230,000) | 30,000 | DTA | ||
Net taxable temporary difference | (2,520,000) | ||||||
DTL @30% | 756,000 | ||||||
Cash | 400,000 | ||||||
Equipment, net of depreciation | 750,000 | ||||||
Patents | 2,000,000 | ||||||
Accounts payable | (300,000) | ||||||
Deferred income taxes payable | (756,000) | ||||||
Notes payable | (230,000) | ||||||
Net identifiable assets | 1,864,000 | ||||||
Consideration paid | 5,254,360 | ||||||
Goodwill to be recognised | 3,390,360 | ||||||