Goodwill}

Pindar Corporation acquired all the outstanding shares of Strauss Company for \(\$ 23,000,000\) on January 1, 2018. On the date of acquisition, Strauss had the following statement of financial position:

All Strauss's assets and liabilities have book values equal to their fair values except for equipment, which has a fair value of \(\$ 20,700,000\).
\section*{Required:}
1. Calculate the amount of goodwill.
2. Prepare the journal entry by Pindar to record the acquisition.
3. Assume that instead of acquiring all the outstanding common shares of Strauss, Pindar acquired \(100 \%\) of Strauss's net assets. What would Pindar's journal entry be in this case to record the acquisition?

Transcribed Image Text:

Strauss Company Statement of Financial Position January 1, 2018 Liabilities Assets Accounts receivable Inventory Property, plant, & equipment (net) $ 6,800,000 Accounts payable $ 2,000,000 4,700,000 Notes payable 8.000.000 Total liabilities 10,000,000 16,300,000 Shareholders' Equity Common shares 2,000,000 Contributed surplus-common shares 8,000,000 Retained earnings 7,800,000 Total shareholders' equity 17,800,000. Total assets Total liabilities & shareholders' $27.800,000 $27,800,000 equity