182k views
2 votes
Mercury Corporation acquired 100 percent of the stock of Jupiter Company when the book value of Jupiter's net assets was $250,000. The fair value of Jupiter's net assets was $280,000 on the acquisition date.

Based on the preceding information, what amount of goodwill will be reported in consolidated financial statements presented immediately following the combination if Mercury paid $275,000 for the acquisition?
A) ($5,000)
B) $0
C) $5,000
D) $25,000

User Vaccano
by
8.2k points

1 Answer

1 vote

There will be $0 amount of goodwill reported in the consolidated financial statements.

In a business combination, goodwill represents the excess of the purchase price over the fair value of the net assets acquired. In this case, the purchase price was $275,000 and the fair value of Jupiter's net assets was $280,000. Since the purchase price is less than the fair value of net assets, there is no goodwill reported in the consolidated financial statements.

User Skoll
by
8.2k points
Welcome to QAmmunity.org, where you can ask questions and receive answers from other members of our community.