On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for mpairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. Soda Inc. $ 10,000 $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $492,500 $384,750 $ 45,500 - 338,000 109,000 $492,500 $ 47,125 128,125 156,250 53,250 $384,750 For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid dividends of $25,000. An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred. What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of $156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for mpairment. Balance sheets as of December 31, 2022 are presented below: Cash Accounts receivable Inventory Land Plant & Equipment, net Investment in Soda Inc. - equity Current liabilities Bonds payable Common shares Retained earnings Pop Co. Soda Inc. $ 10,000 $ 5,000 38,750 42,250 75,250 62,500 50,000 100,000 150,000 175,000 168,500 $492,500 $384,750 $ 45,500 - 338,000 109,000 $492,500 $ 47,125 128,125 156,250 53,250 $384,750 For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid dividends of $25,000. An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred. What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Multiple Choice
о
($8,250)
о
О
$7,125
$9,500
о
$27,500
Transcribed Image Text:On January 1, 2022, Pop Co. acquired 75% of the outstanding common shares of Soda Inc. for $161,250 cash. On that date, Soda had common shares of
$156,250 and retained earnings of $31,250. At acquisition, the identifiable assets and liabilities of Soda had fair values that were equal to carrying
amounts except for inventory, which had fair value $8,000 greater than carrying amount and plant and equipment, which had fair values $10,000 greater
than carrying amounts. The plant and equipment had a remaining useful life of 5 years on January 1, 2022.Any goodwill will be tested yearly for
impairment.
Balance sheets as of December 31, 2022 are presented below:
Cash
Accounts receivable
Inventory
Land
Plant & Equipment, net
Investment in Soda Inc. - equity
Current liabilities
Bonds payable
Common shares
Retained earnings
Pop Co.
$ 10,000
Soda Inc.
$ 5,000
38,750
42,250
75,250
62,500
50,000
100,000
150,000
175,000
168,500
$384,750
$492,500
$ 45,500
-
338,000
109,000
$492,500
$ 47,125
128,125
156,250
53,250
$384,750
For 2022, Soda Inc. reported net income of $37,000 and paid dividends of $15,000. Pop Co. reported net income for 2022 of $50,000 and paid
dividends of $25,000.
An impairment test on goodwill conducted on December 31, 2022, indicated that a $500 loss had occurred.
What was the amount of goodwill that arose on the acquisition of Soda's common shares on January 1, 2022?
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