Question

Perch Co. acquired 80% of the common stock of Float Corp. for $1,600,000. The fair value of Float's net assets was $1,850,000, and the book value was $1,500,000. The noncontrolling interest shares of Float Corp. are not actively traded. 5) What is the total amount of goodwill recognized at the date of acquisition? A) $0. B) $150,000. C) $170,000. D) $120,000. E) $250,000.

Answer 1

Answer: $150,000

Step-by-step explanation:

The total amount of goodwill that'll be recognized at the date of acquisition will be calculated as follows:

First, we need to calculate the goodwill of controlling interest. This will be:

= $1600000 - ($1850000 × 80%)

= $1600000 - ($1850000 × 0.8)

= $1600000 - $1,480,000

= $120000

Then, we calculate the total amount of goodwill that'll be recognized at the date of acquisition which will be the goodwill of controlling interest divides by the percentage of ownership. This will be:

=$120000/80%

= $120000/0.8

= $150,000