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On January 1, 2017, Astrakan Company acquires 80% of the outstanding common stock of Gobi, Inc....

On January 1, 2017, Astrakan Company acquires 80% of the outstanding common stock of Gobi, Inc. for a purchase price of $970,000. It was determined that the fair value of the non-controlling interest in the subsidiary is $240,000. The book value of the Gobi’s stockholders’ equity on the date of acquisition is $700,000 and its fair value of net assets is $1,100,000. The acquisition-date acquisition accounting premium (AAP) is allocated $250,000 to equipment with a remaining useful life of 10 years, and $150,000 to a patent with a remaining useful life of 6 years.

Determine the total goodwill to be recognized at acquisition date.

a.   $102,500

b.   $100,000

c.   $110,000

d.   $-0-

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Expert Solution

Solution
All Amount in $
Astrakan Purchased 80% of the Outstanding Common Stock of Gobi
Purchase Consideration          9,70,000
Fair value of Non Controlling Interest          2,40,000
Share of Non Controlling Interest 20%
Fair value of net assets 240000/20*100
Fair value of net assets        12,00,000
Favir Value of Controlling Interest
Share 80%
Fair value of net assets        12,00,000
Favir Value of Controlling Interest 1200000*80/100
Fair value          9,60,000
Fair value of net assets            -10,000
hence Goodwill             10,000
The Fair value as per the above question is not in the list.

ekkarill92 answered 2 years ago
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