Question

On March 31, 2018, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $18,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 7,000,000 $ 8,500,000 Property, plant, and equipment 12,000,000 15,000,000 Other assets 1,100,000 1,600,000 Current liabilities 5,000,000 5,000,000 Long-term liabilities 7,000,000 6,500,000 Required: Calculate the amount paid for goodwill.

Answer 1

the amount paid for goodwill is $4,400,000

Step-by-step explanation:

Goodwill is the excess of the purchase price over assets and liabilities acquired in a business combination agreement.

Transfer of Assets and Liabilities is done at their fair values thus consider the fair values for calculation of goodwill.

Please Note : There is no Non-controlling interest as all outstanding common stock of Barney Corporation were acquired by Wolfson Corporation.

Journal for Acquisition

Current Assets $ 8,500,000 (debit)

Property, plant, and equipment 15,000,000 (debit)

Other assets $1,600,000 (debit)

Goodwill (Balancing figure) $4,400,000 (debit)

Current liabilities $5,000,000 (credit)

Long-term liabilities $6,500,000 (credit)

Cash - Purchase Price $18,000,000 (credit)