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14 July, 13:00

On October 1, 20X3, Green Corporation paid $450,000 for all of Yellow Company's outstanding common stock. On that date, the book values and fair values of Yellow's recorded assets and liabilities were as follows: Book Value Fair Value Cash and Receivables $75,000 $75,000 Inventory 155,000 160,000 Buildings and Equipment (net) 260,000 320,000 Liabilities (150,000) (150,000) Net Assets $340,000 $405,000 Based on the preceding information, the differential implicit in this acquisition is

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  1. 14 July, 13:08
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    The differential implicit in this acquisition is $110,000

    Explanation:

    The computation of the differential implicit is shown below:

    Differential implicit = Amount paid - book value

    = $450,000 - $340,000

    = $110,000

    The differential implicit shows a difference between the amount paid and the book value so we do not consider the fair value which is given in the question
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