Determine the purchase price atwhich P Co. would record $50,000 ofgoodwill.$755,000$740,000$760,000$745,000None of the options is correct P Company wishes to acquire S Co.for cash in an asset acquisition, andappraisals reveal that the inventoryhas a fair value $185,000, and theequipment has a current value of$645,000. The book value and fairvalue of liabilities are the same. Thefollowing balance sheets werereported on January 1, 2011, for PCompany and S Company:P Co.$ 150,000Sco.$ 30,000CashInventoryEquipment (net)450,000150,000570,000$750,0001,320,000Total$1,920,000$ 450,000$150,000Total liabilitiesCommon stock, $20 par valueOther contributed capitalRetained earnings600,000300,000375,000105,000495,000195,000$1,920,000$750,000Total

The amount of goodwill in the case of merger and acquisition is determined by subtracting the…

Answered: Determine the purchase price at which P…

Business

Accounting

Determine the purchase price at which P Co. would record $50,000 of 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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Question

Determine the purchase price at
which P Co. would record $50,000 of
goodwill.
$755,000
$740,000
$760,000
$745,000
None of the options is correct

P Company wishes to acquire S Co.
for cash in an asset acquisition, and
appraisals reveal that the inventory
has a fair value $185,000, and the
equipment has a current value of
$645,000. The book value and fair
value of liabilities are the same. The
following balance sheets were
reported on January 1, 2011, for P
Company and S Company:
P Co.
$ 150,000
Sco.
$ 30,000
Cash
Inventory
Equipment (net)
450,000
150,000
570,000
$750,000
1,320,000
Total
$1,920,000
$ 450,000
$150,000
Total liabilities
Common stock, $20 par value
Other contributed capital
Retained earnings
600,000
300,000
375,000
105,000
495,000
195,000
$1,920,000
$750,000
Total

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