On January 2, 2019, Bubba and Company paid $5,000,000 in cash to acquire 100% of the Cire
Question:
On January 2, 2019, Bubba and Company paid $5,000,000 in cash to acquire 100% of the Cire Company's voting common stock. Cire's balance sheet on that date showed the following balances in its accounts:
Cire Company
Balance Sheet
December 31, 2018
Plant and Equipment ...................... $ 5,574,900
Mortgage Payable ............................ $4,324,900
Stockholders Equity ......................... 1,250,000
Total ................................................... $5,574,900
The appraised value of Cire's net assets was $1,400,000 greater than its book value on the date of acquisition.
Required
a. Compute the amount of goodwill to be recorded on the date of acquisition.
b. How is goodwill accounted for subsequent to the date of acquisition?
GoodwillGoodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-0134730370
2nd edition
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella