Answer to Question #163546 in Accounting for Willy

Question

At the current year-end, Star Company purchased for P30 per share all 200,000 of Moon Company’s outstanding shares. On this date, the acquiree’s statement of financial position showed net assets of P5,000,000.

Additionally, the fair value of the acquiree’s identifiable assets on this date was P400,000 in excess of the carrying amount.

In the statement of financial position, what amount should be reported as goodwill as a result of the acquisition?

a. 1,000,000

b. 400,000

c. 600,000

d. 350,000

Answer 1

Formula for goodwill. =consideration-net assets at fair market value

=(200000*30)-(5000000+400000)

=6000000-5400000

=600000