Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose

image text in transcribed

Goodwill arises when one firm acquires the net assets of another firm and pays more for those net assets than their current fair value. Suppose that Target Co. had operating income of S61,700 and net assets with a fair value of $215,000. Takeover Co. pays $318,000 for Target Co.'s net assets and business activities. Required a. How much goodwill will result from this transaction? b. Calculate the ROl for Target Co. based on its present operating income and the fair value of its net assets. (Round your percentage answer to 2 decimal places.) c. Calculate the ROl that Takeover Co. will ean if the operating income of the acquired net assets continues to be $61,700. (Round your percentage answer to 2 decimal places.) d. Takeover Co. is wlling to pay $103,000 more than fair value for the net assets acquired from Target Co. as it represents goodwill and the expected superior earnings in future years. True False

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Processing Learn About Types Of Audits For Auditors Auditing For Dummies

Authors: Mazie Dannenberg

1st Edition

B097DGKYS7, 979-8524930576

More Books

Students also viewed these Accounting questions

Question

Different types of Grading?

Answered: 1 week ago

Question

Explain the functions of financial management.

Answered: 1 week ago

Question

HOW MANY TOTAL WORLD WAR?

Answered: 1 week ago

Question

Discuss the scope of financial management.

Answered: 1 week ago