Question

Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $30,000,000 in cash. The book values and fair values of Iceberg’s assets and liabilities were as follows: Book Value Fair Value Current assets $ 11,400,000 $ 14,400,000 Property, plant, and equipment 20,200,000 26,200,000 Other assets 3,400,000 4,400,000 Current liabilities 7,800,000 7,800,000 Long-term liabilities 13,200,000 12,200,000 Required: Calculate the amount paid for goodwill. (Enter your answer in millions (i.e. 1,000,000 should be entered as 1).)

Answer 1

Answer:

Good will $9(million)

Explanation:

($Million)

Purchase price $30

Less: Fair value of assets acquired 41

Less: Fair value of liabilities assumed (20)

Fair value of identifiable net assets 21

Goodwill (30-21) $ 9

The acquiring company records goodwill equal to the purchase price less the fair value of identifiable net assets acquired.