• Alphabet Inc. acquired a technology startup for $2.5 billion during the year, resulting in goodwill recognized on its balance sheet. The company provided the following financial information:
  • Goodwill Recognized: $2.5 billion
  • Total Assets: $200 billion
  • Total Liabilities: $80 billion
  • Net Income (before acquisition): $15 billion

• Requirements:
  1. Calculate the total consideration paid for the acquisition, including any contingent payments.
  2. Prepare a balance sheet reflecting the goodwill recognized and adjusted total assets.
  3. Analyze the impact of goodwill on Alphabet's financial ratios, including debt-to-equity ratio and return on equity (ROE).
  4. Discuss the impairment testing requirements for goodwill in Alphabet's financial statements.
  5. Evaluate the strategic rationale behind Alphabet's acquisition and its potential synergies.