On January 2, 2018, the Rambler Company purchased 40% of the outstanding common stock of the AMC Corporation for $2,000,000. AMC's net assets had a book value of $3,900,000 as of January 2, 2018. AMC's buildings were undervalued by $350,000, their land was overvalued by $75,000, and their inventory was undervalued by $145,000.Required:Determine the amount of goodwill resulting from the purchase of the AMC stock.
What will be an ideal response?
| Amount paid for the 40% investment | $ | 2,000,000 | ||
| Book value of net assets acquired | (1,560,000 | ) | ($3,900,000 × 40%) | |
| Excess of the amount paid | ||||
| over book value acquired | $ | 440,000 | ||
| Allocation to undervalued buildings | (140,000 | ) | ($350,000 × 40%) | |
| Allocation to overvalued land | 30,000 | ($75,000 × 40%) | ||
| Allocation to undervalued inventory | (58,000 | ) | ($145,000 × 40%) | |
| Goodwill | $ | 272,000 | ||
You might also like to view...
Many B2B marketers can take advantage of the ________ of business customers, focusing their sale efforts and perhaps even locating their distribution centers in a single region
A) geographic concentration B) mass media consumption C) multiple requirements D) fluctuating demand E) organizational changes
If you believe your listeners are likely to be hostile to you or your message, your presentation will have to
A) include few examples to avoid overwhelming the audience. B) be more modest, downplaying your credentials. C) use language that is familiar to the majority of the audience. D) establish your credibility and possibly quote other experts. E) use complex terminology to demonstrate your mastery of the material.
To assist in detecting illegal bribes, Cut Rite Contractors, Inc., and all U.S. companies, must
A. conceal financial records that reveal past bribes. B. keep records that "accurately and fairly" reflect financial activities. C. make bribes through third parties rather than directly to officials. D. permit payments to foreign officials that are unlawful in that country.
Maurice, the supervising manager of a telecommunications company, requires detailed information about the expenses that the company incurred from its monthly operations in the last fiscal year. In this scenario, Maurice should refer to the _____.
A. profit and loss statement B. statement of cash flow C. owners' equity statement D. statement of retained earnings