Final answer:
The calculation of goodwill in the Halifax Corporation's acquisition of Nova Company results in $65,700,000, which is the excess of the total consideration transferred ($115,700,000) over the fair value of Nova's identifiable net assets ($50,000,000).
Step-by-step explanation:
The question deals with the calculation of goodwill during a corporate acquisition when a company acquires another company. Goodwill is an intangible asset that represents the excess of the purchase consideration over the fair value of the net identifiable assets acquired.
To calculate goodwill, we follow this formula:
Goodwill = Consideration Transferred + Fair Value of Non-controlling Interests (if any) + Fair Value of Previous Equity Interest (if any) – Fair Value of Net Identifiable Assets Acquired
In this case, the full consideration transferred includes:
- Cash paid to Nova's shareholders: $20,000,000
- Fair value of stock issued: $90,000,000
- Registration fees on stock issued: $2,000,000
- Merger consultant fees: $3,500,000
- Expected present value of earnout agreement: $200,000
Adding these amounts gives us the total consideration transferred:
Total Consideration Transferred = $20,000,000 + $90,000,000 + $2,000,000 + $3,500,000 + $200,000 = $115,700,000
Next, we subtract the fair value of Nova's identifiable net assets:
Goodwill = $115,700,000 – $50,000,000 = $65,700,000
Therefore, Halifax Corporation will report $65,700,000 of goodwill on its balance sheet after the acquisition of Nova Company.