Question

Arizona Corp. acquired the business Data Systems for $305,000 cash and assumed all liabilities at the date of purchase. Data’s books showed tangible assets of $310,000, liabilities of $16,000, and stockholders’ equity of $294,000. An appraiser assessed the fair market value of the tangible assets at $295,000 at the date of acquisition.

Required:
a. Compute the amount of goodwill acquired.
b. Record the acquisition in a financial statements model.

Answer 1

a. $26,000

b. the acquisition in a financial statements model

Non - Current Assets

Goodwill $26,000

Tangible Assets $295,000

Total $321,000

Current Liabilities

Liabilities $16,000

Total $321,000

Step-by-step explanation:

Goodwill is the excess of the Consideration / Purchase Price over the Assets and Liabilities acquired.

Assets and Liabilities are Acquired at their Acquisition date Fair Values not Book Values.

Goodwill Calculation :

Consideration $305,000

Less Assets Acquired:

Tangible Assets ($295,000)

Add Liabilities Acquired:

Liabilities $16,000

Goodwill $26,000