Compute the amount of acquired Goodwill, including contingent earnings and bargain purchase Assume that you are...

Compute the amount of acquired Goodwill, including contingent earnings and bargain purchase

Assume that you are charged with assigning fair values related to a $6,080,000 acquisition. You determine that the fair value of the net identifiable tangible assets is $2,960,000. You also conclude that the purchase included a Customer List with a fair value at $544,000.

How much Goodwill will you record in this acquisition?

Continuing from part (a), now also assume that the purchase and sale agreement requires the payment of an additional $1,480,000 if the subsidiary achieves a certain level of earnings. You estimate the fair value of that contingent earnings clause in the agreement to be $352,000. How does this additional information affect your computation of Goodwill?

The amount of Goodwill recorded is $

Answer

Solutions

Expert Solution

Acquisition fair value = $6,080,000

Net identifiable tangible assets = $2,960,000

Customer List with a fair value = $544,000

a) Calculating Goodwill will you record in this acquisition

Acquisition fair value - Net identifiable tangible assets - Customer List with a fair value

= $6,080,000 - $2,960,000 - $544,000

= $2,576,000

Goodwill will you record in this acquisition $2,576,000

Payment of an additional = $1,480,000

Contingent earnings clause = $352,000

Now calculating Purchase Consideration =

Acquisition fair value + Contingent earnings clause

= $6,080,000 + $352,000

=$6,432,000

Net identifiable tangible assets + Customer List with a fair value

= $2,960,000 + $544,000

=$3,504,000

Good will = $6,432,000 - $3,504,000

Good will = $2,928,000

PLEASE.....UPVOTE....ITS REALLY HELPS ME....THANK YOU....SOOO MUCH....

ekkarill92 answered 1 year ago

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