Question 1) Calculate the amount of goodwill that would be recorded by Brave for

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Question 1) Calculate the amount of goodwill that would be recorded by Brave for this acquisition.

Question 2) Suppose that Brave had a total of $1,300,000,000 in assets prior to their acquisition of Tangent. Calculate the total assets that would be reported by Brave after correctly recording their purchase of Tangent.

Can someone show me how to work out these problems? My book doesn't explain it too well and neither did the professor :/

The following information applies to the questions displayed below.] Assume that Brave Pharmaceuticals acquired Tangent Therapeutics at the end of 2017. This acquisition was accomplished by paying a total of $900,000,000 in cash to acquire all 10 million shares of Tangent's outstanding common stock from Tangent's shareholders. This purchase price of $90 per share represented a 40% premium over Tangents share price immediately prior to the acquisition. Below is information on the fair market value (at the time of the acquisition) and historical cost (as listed on Tangent's pre-acquisition balance sheet) for all of the separately identifiable assets and liabilities acquired from Tangent: Account Name Fair Market Value Historical Cost (on Tangents Pre-Acquisition Balance Sheet) Inventory Intangible Assets Property, Plant, and Equipment Current Liabilities Notes Payable 15,000,000 S 200,000,000 $20,000,000 $5,000,000 $ 20,000,000 $10,000,000 $0 $10,000,000 $5,000,000 $20,000,000 References

Explanation / Answer

answer 1

Computation of Goodwill

Goodwill is the excess payment made over the fair value of net assets of aquiree as purchase consideration.

The computation is as follows:

(Amount in Millions)

Purchase Consideration $ 900

Less: Fair value of Net Assets

Fair Value of Assets

Inventory $15

Intangible Assets $200

Property, Plant & Equipment $20

Total $235  

Fair Value of Liabilities

Current Liabilities $5

Notes Payable $20

Total $25 $210

Goodwill (Purchase Consideration-Fair Value of Net Assets) $690  

Answer 2

Computation of Total Assets after acquisition

Assets Prior to Acquisition $1300

Assets acquired in business acquisition

Inventory $15

Intangible Assets (Other Than Goodwill) $20

Goodwill (Computed in Answer 1) $690

Property, Plant & Equipment $20

Total Assets $2045

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