Question
Peter acquires 100% of Saul for 6,083,035 in a tax-free business combination. The applicable income tax rate is 30%. Goodwill is not deductible for tax
Peter acquires 100% of Saul for 6,083,035 in a tax-free business combination. The applicable income tax rate is 30%. Goodwill is not deductible for tax purposes. Based on the following information about the assets and liabilities of Sunfish, what amount should Porpoise record as goodwill for this acquisition on the date of acquisition?
| Old book basis | Old tax basis | Fair value | |
| Cash | $400,000 | $400,000 | $400,000 |
| Equipment, net of depreciation | 500,000 | 200,000 | 750,000 |
| Patents | 0 | 0 | 2,000,000 |
| Goodwill | 80,000 | NA | ? |
| Accounts payable | (300,000) | (300,000) | (300,000) |
| Deferred income taxes payable | (90,000) | NA | ? |
| Notes payable | (200,000) | (200,000) | (230,000) |
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Advanced Financial Accounting
Authors: Theodore E. Christensen, David M. Cottrell, Richard E. Baker
10th edition
78025621, 978-0078025624
