Peregrine Company acquires all of the voting stock of Falcon Corporation for $65
ID: 2330452 • Letter: P
Question
Peregrine Company acquires all of the voting stock of Falcon Corporation for $65,000, in a merger. Falcon’s balance sheet reports the following asset and liability balances:
Current assets
$15,000,000
Plant & equipment
60,000,000
Current liabilities
10,000,000
Long-term debt
40,000,000
Assume the book values of Falcon’s assets and liabilities equal their fair values. How much goodwill does Peregrine report at the date of acquisition?
$35,000,000
$40,000.000
$30,000
$0
Current assets
$15,000,000
Plant & equipment
60,000,000
Current liabilities
10,000,000
Long-term debt
40,000,000
Explanation / Answer
Answer : $0 Goodwill
Explanation : Goodwill is the zero when book values are equal to fair values
1)Goodwill is the non current asset. It was not a physical asset.
2) It is the intangible asset cannot be identifiable easily.
3) Goodwill is the excess of the purchase price over the fair value of net assets acquired by a particular company
4) If the purchase price or book values of a company equals to their fair values then the goodwill is zero ($0)
5) Goodwill adds some value to the business.
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