Question

On July 31, 2025, Blossom Company paid $2,950,000 to acquire all of the common stock of Conchita Incorporated, which became a division (a reporting unit) of Blossom. Conchita reported the following balance sheet at the time of the acquisition.

Current assets: $710,000
Current liabilities: $510,000
Noncurrent assets: $2,650,000
Long-term liabilities: $410,000
Total assets: $3,360,000
Stockholders’ equity: $2,440,000
Total liabilities and stockholders’ equity: $3,360,000

It was determined at the date of the purchase that the fair value of the identifiable net assets of Conchita was $2,655,000. Over the next 6 months of operations, the newly purchased division experienced operating losses. In addition, it now appears that it will generate substantial losses for the foreseeable future. At December 31, 2025, Conchita reports the following balance sheet information.

Current assets: $430,000
Noncurrent assets (including goodwill recognized in purchase): $2,350,000
Current liabilities: ($700,000)
Long-term liabilities: ($410,000)
Net assets: $1,670,000

Finally, it is determined that the fair value of the Conchita Division is $1,850,000.

(a) Compute the amount of goodwill recognized, if any, on July 31, 2025. (If the answer is zero, do not leave the answer field blank. Enter 0 for the amount.)

Answer 1

The goodwill recognized on July 31, 2025, when Blossom Company acquired Conchita Incorporated was $295,000, calculated by subtracting the fair value of the identifiable net assets ($2,655,000) from the purchase price ($2,950,000).

Step-by-step explanation:

The amount of goodwill recognized on July 31, 2025, can be calculated by subtracting the fair value of the identifiable net assets from the purchase price. In this case, the purchase price was $2,950,000 and the fair value of the identifiable net assets was $2,655,000. So the goodwill recognized is $295,000 ($2,950,000 - $2,655,000). Therefore, the amount of goodwill recognized on July 31, 2025, is $295,000.

The amount of goodwill recognized during the acquisition of Conchita Incorporated by Blossom Company can be calculated by subtracting the fair value of the identifiable net assets from the purchase price. The purchase price was $2,950,000 and the fair value of the identifiable net assets was $2,655,000.

Goodwill = Purchase Price - Fair Value of Identifiable Net Assets
Goodwill = $2,950,000 - $2,655,000
Goodwill = $295,000

Therefore, the amount of goodwill recognized on July 31, 2025, was $295,000.