COMPUTE THE GOODWILL. On January 1, 2021, ABC acquired all the assets and assumed all the liabilities of DEF Co. for P4,500,000. Relevant informationfollows:ASSETSFair ValuesCarrying Value55,000Cash55,000800,000Receivable800,000Allowance for Doubtful Accounts150,000700,0003,500,000150,000180,000750,0004,000,000200,0001,555,0000InventoryLandGoodwillLiabilities1,555,000DEC Co. has research and development projects with fair value of P100,000. ABC does not intend to use those R&Ds.However, there have been exchange transactions involving the information generated from DEF, but those transactions areinfrequent.> All fair value adjustments result to temporary differences but do not affect the tax bases of the assets and liabilities. Thetax rate is 30%.ABC incurred P200,000 on general administrative costs of maintaining an internal acquisition department.Compute the goodwill (gain on bargain purchase)?

Step 1 Since as per given case, the acquirer has acquired all assets and liabilities or acquired…

Answered: COMPUTE THE GOODWILL.

Business

Accounting

COMPUTE THE GOODWILL.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Portfolio Management

Portfolio management is the process by which an investor decides that how the person will invest in a variety of assets in order to get a desired return in the future. A portfolio means a pool of assets that includes securities, bonds, and other investment instruments which helps in risk minimization of the money that has been invested. In other words, it can be said that a portfolio means a combination of assets in which an investor decides to invest their money in order to get a lump sum return in the future or even a series of cash flow that the person is expecting at the end of their job life.

Question

COMPUTE THE GOODWILL.

On January 1, 2021, ABC acquired all the assets and assumed all the liabilities of DEF Co. for P4,500,000. Relevant information
follows:
ASSETS
Fair Values
Carrying Value
55,000
Cash
55,000
800,000
Receivable
800,000
Allowance for Doubtful Accounts
150,000
700,000
3,500,000
150,000
180,000
750,000
4,000,000
200,000
1,555,0000
Inventory
Land
Goodwill
Liabilities
1,555,000
DEC Co. has research and development projects with fair value of P100,000. ABC does not intend to use those R&Ds.
However, there have been exchange transactions involving the information generated from DEF, but those transactions are
infrequent.
> All fair value adjustments result to temporary differences but do not affect the tax bases of the assets and liabilities. The
tax rate is 30%.
ABC incurred P200,000 on general administrative costs of maintaining an internal acquisition department.
Compute the goodwill (gain on bargain purchase)?

Definition Definition Intangible asset that includes proprietary or intellectual property and brand value of a firm. Goodwill is recorded in the books when a firm purchases another firm and the purchase price is more than the fair value of net identifiable assets of the acquired business. The amount of goodwill is recorded on the asset side of the balance sheet (statement of financial position).

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