Samper Company reported the book value of its net assets at $160,000 when Public Corporation acquired 100 percent of its voting stock for cash. The fair value of Samper's net assets was determined to be $190,000 on that date. Required: Determine the amount of goodwill to be reported in consolidated financial statements presented immediately following the combination and the amount at which Public will record its investment in Samper if the amount paid by Public is $310,000. $196,000. $150,000.

Question

Immanuel

Business

12 August, 07:20

Samper Company reported the book value of its net assets at $160,000 when Public Corporation acquired 100 percent of its voting stock for cash. The fair value of Samper's net assets was determined to be $190,000 on that date. Required: Determine the amount of goodwill to be reported in consolidated financial statements presented immediately following the combination and the amount at which Public will record its investment in Samper if the amount paid by Public is $310,000. $196,000. $150,000.

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Mylie Lam · Answer 1

a) Goodwill of 120,000

b) Goodwill of 6,000

c) Negative Goodwill of 40,000

Explanation:

In Consolidated Financial Statements the investment made by the acquiring company must be replaced for the assets and liabilities of the acquired company at its fair value. The difference between the net asset fair value of the acquired company and the value of the investment in the acquiring company, which is the purchase price, is registered as Goodwill. When the purchase price is larger than the net asset fair value, the Goodwill is an intangible asset. When the difference is negative, the Negative Goodwill must be recognized and separately disclosed on the balance sheet, immediately below the goodwill heading (Financial Reporting Standard 10).