Pace Corporation acquired 100 percent of Spin Company's common stock on January 1, 20X9. Balance sheet data for the two companies immediately following the acquisition follow: PACE Cash $30,000, Accounts receivable $80,000, Inventory $150,000, Land $65,000, Buildings and Equipment $260,000 (less accumulated depreciation of $120,000, Investment in Spin Company $150,000, Accounts Payable $45,000, Taxes payable $20,000, Bonds Payable $200,000, Common stock $50,000, Retained earnings $300,000. SPIN: Cash $25,000, Accounts Receivable $40,000, Inventory, $55,000, Land $40,000, Buildings and equipment $160,000 (less accumulated depreciation $50,000, Accounts Payable $33,000, Taxes payable $8,000, Bonds payable $100,000, Common Stock $20,000, Retained earnings $109,000. At the date of the business combination, the book values of Spin's net assets and liabilities approximated fair value except for inventory, which had a fair value of $60,000, and land, which had a fair value of $50,000. The fair value of land for Pace Corporation was estimated at $80,000 immediately prior to the acquisition. Based on the preceding information, what amount of goodwill will be reported in the consolidated balance sheet prepared immediately after the business combination?
Goodwill is an intangible asset as a result of a business combination. When the company pays more than the acquiree's net assets, goodwill is recorded. This happens when the company being bought has a good reputation apart from what's recorded in its books.
Answer and Explanation: 1
Goodwill = c. $6,000
|Less: Fair Value of SPIN's net assets|
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fromChapter 11 / Lesson 9
Intangible assets do not have physical properties but do have value. Explore the definition and examples of intangibles compared with tangible assets, intangible asset valuation, creating journal entries, and amortization of assets like copyrights, patents, and goodwill.