Question
Computing the amount of goodwill in an acquisition On July 1, 2019 an investor paid $5,920,000 for 100% of the voting common stock of an
Computing the amount of goodwill in an acquisition
On July 1, 2019 an investor paid $5,920,000 for 100% of the voting common stock of an investee. The transaction qualifies as a business combination. At that time, investee had the following summarized balance sheet information:
July 1, 2019 | |
---|---|
Current assets | $800,000 |
Plant and equipment, net | 4,480,000 |
Liabilities | 2,240,000 |
Equity | 3,040,000 |
On July 1, 2019, the fair value of the plant and equipment was $1,120,000 more than its carrying amount. The acquisition-date fair values approximated their recorded book values for all of the remaining individual net assets of the investee. Related to this transaction, what amount of goodwill must the investor report in its post-acquisition consolidated balance sheet on July 1, 2019?
$4,000,000
$2,880,000
$1,760,000
$1,120,000
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