On January 1, 2018, Bast Co. had a net book value of $2,100,000 as follows: Fish

Question

On January 1, 2018, Bast Co. had a net book value of $2,100,000 as follows:

Fisher Co. acquired all of the outstanding preferred shares for $148,000 and 60% of the common stock for $1,281,000. Fisher believed that one of Bast's buildings, with a twelve-year life, was undervalued on the company's financial records by $70,000.

Required: What is the amount of goodwill to be recognized from this purchase?

Preferred stock, 2,000 shares $70 par value, cumulative, nonparticipating, nonvoting $140,000    Common stock, 22,400 shares $50 par value 1,120,000 Retained earnings 840,000 Total shareholders’ equity $2,100,000

Explanation / Answer

Total amount paid= Outstanding Preferred Shares + Common Stock

= $ 148000 + $ 1,281,000

= $ 1,429,000

Consideration = Preferred Shares + Commom Stock (Only 60%) + Retained Earnings (Only 60%)+ Revalued Buliding (Only 60%)

= $ 140,000 + $ 672,000 ( $ 1,120,000*60%) + $ 504,000 ($ 840,000*60%) + $ 42,000 ($ 70,000*60%)

= $ 1,358,000

Amount of Goodwill = Total amount paid Less Consideration

= $ 1,429,000 - $ 1,358,000

= $ 71,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

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