There is an assignment of fair values related to a $3,765,000 acquisition. The f

Question

There is an assignment of fair values related to a $3,765,000 acquisition. The fair value of the net identifiable tangible assets is $1,850,000. The purchase included a Customer List with a fair value at $337,000.

A) Assume that the purchase and sale agreement requires the payment of an additional $850,000 if the subsidiary achieves a certain level of earnings. The fair value of that contingent earnings clause in the agreement is estimated to be $216,500. How does this additional information affect computation of goodwill?

Explanation / Answer

Amount in $ The fair value of Net identified tangible assets 1850000 The fair value of Net identified intangible assets Customer lists 337000 Other identified intangible assets 1578000 1915000 Total Fair value of related to acquistion 3765000 Add : Value of contingent consideration = additional goodwill 216500 216500 Total Investment 3981500 Now assuming that net identifed intangible assets consists of only goodwill and any value of contingent consideration will increase the value of goodwill.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.