Sheridan Company purchases Miles Company for $4650000 cash on January 1, 2018. T

Question

Sheridan Company purchases Miles Company for $4650000 cash on January 1, 2018. The book value of Miles Company's net assets reported on its December 31, 2017 financial statement was $3250000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $530000, and the fair value of identifiable intangible assets exceeded book value by $285000. Determine the fair value of identifiable net assets used to record goodwill.

A. $4065000

B. $3250000

C. $3780000

D. $245000

Explanation / Answer

Correct option is A=$4,065,000

Explanation

Fair value of identifiable net assets used to record goodwill:

=Book value of net assets+increase in fair value of tangible assets from book value+increase in fair value of identifiable intangible assets exceeded book value

=$3,250,000+530,000+285,000

=$4,065,000

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