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In: Finance

Company A purchases Company B. This is a 100% equity purchase which means that Company A...

Company A purchases Company B. This is a 100% equity purchase which means that Company A acquires all of the Company B assets and assumes the liabilities of Company B.

Calculate the value of goodwill recognized in the acquisition. Round to the nearest whole dollar and do not include the dollar sign ($).

Assume

  • the current market value of tangible physical assets is $1,357,924 (determined by Company A as at the acquisition date)
  • the current market value of the only identifiable intangible asset (a customer list) is $125,000 (determined by Company A as at the acquisition date)
  • Operating (non-Financial) liabilities have an appraised value of $300,000 before and after the acquisition.
  • Financial Liabilities were appraised by company B to be valued at $600,000 immediately Before the acquisition.
  • Financial Liabilities were appraised by Company A to be valued at $495,000 immediately After the acquisition.
  • There are no other assets or liabilities to consider than those presented above
  • Company A paid $987,000 cash for Company B.

Solutions

Expert Solution

Market value of tangible assets 1357924
Market value of intangible assets 125000
Total 1482924
Less:
Operating liabilities 300000
Financial liabilities appraised by Com. A after acquisition 495000
795000
Net assets acquired 687924
Value of Goodwill = Purchase value - net assets acquired
Value of goodwill = 987000-687924 = $299,076

jeff jeffy answered 2 years ago
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