Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Trying this again: Please only show me how to calculate Goodwill for a total of $875,000 SUN acquired 100% of the voting shares of MOON.

Trying this again: Please only show me how to calculate Goodwill for a total of $875,000

SUN acquired 100% of the voting shares of MOON. In exchange, SUN issued 60,000 common shares, with a market value of $22 per share, to the common shareholders of MOON. Both companies have a June 30 year-end, and this transaction occurred on June 30, 2020.

The following are the statements of financial position of the two companies at June 30, 2020 before the transaction took place.

Statements of Financial Position June 30, 2020

SUN Moon
Carrying Value Fair Values Carrying Value Fair Values
Current assets $ 450,000 $ 400,000 $ 200,000 $ 225,000
Capital assets (net) 14,000,000 12,000,000 1,000,000 950,000
Goodwill 200,000 -
Total 14,650,000 1,200,000
Current liabilities $ 200,000 $ 100,000 $ 145,000 $ 150,000
Long-term liabilities 600,000 625,000 200,000 180,000
Preferred shares - 200,000 200,000
Common shares 250,000 250,000
Retained earnings 13,600,000 405,000
14,650,000 1,200,000

Instructions: Enter all numbers without dollar signs. Round numbers to the nearest whole dollar do not enter any decimals in your number. Use commas properly. If the amount is zero, enter 0, do not leave any answers blank. For example, a properly formatted number is 125,250. Numbers incorrectly formatted with not result in any marks.

Solution: Below are the correct answers except goodwill. Can someone show me to how to calculate it? I had gotten $675,000 but It is supposed to be $875,000

Please only show me how to calculate Goodwill for a total of $875,000

Carrying Value (SUN) Fair Value (Moon) Total
Current Assets 450,000 225,000 675,000
Capital Assets 14,000,000 950,000 14,950,000
Goodwill 200,000 0 475,000 675,000
Total 14,650,000 1,175,000 16,300,000
Current Liabilities 200,000 150,000 350,000
Long-term Liabilities 600,000 180,000 780,000
Preferred Shares 0 200,000 200,000
Common Shares 250,000 1,320,000 1,570,000
Retained Earnings 13,600,000 13,600,000
14,650,000 16,500,000

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

Financial Accounting Information For Decisions

Authors: Robert w Ingram, Thomas L Albright

6th Edition

9780324313413, 324672705, 324313411, 978-0324672701

More Books

Students also viewed these Accounting questions