Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013: $\begin{array}{lr}\text { Preferred stock - } \$ 90 \text { par value, nonvoting and nonparticipating; }\
\text {$ 9 \% $ cumulative dividend }&\$2,700,000\
\text {Common stock - \$25 par value }&5,600,000\
\text {Retained earnings }&14,000,000\
\end{array}$
Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000. A database valued at $656,000 was recognized and amortized over five years.
During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment.
What is the amount of goodwill resulting from this acquisition?

Question

Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013: $\begin{array}{lr}\text { Preferred stock - } \$ 90 \text { par value, nonvoting and nonparticipating; }\
\text {$ 9 \% $ cumulative dividend }&\$2,700,000\
\text {Common stock - \$25 par value }&5,600,000\
\text {Retained earnings }&14,000,000\
\end{array}$
 Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000. A database valued at $656,000 was recognized and amortized over five years.
During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment.
What is the amount of goodwill resulting from this acquisition?

Quizplus · Accepted Answer

The Answer of Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013: $\begin{array}{lr}\text { Preferred stock - } \$ 90 \text { par value, nonvoting and nonparticipating; }\
\text {$ 9 \% $ cumulative dividend }&\$2,700,000\
\text {Common stock - \$25 par value }&5,600,000\
\text {Retained earnings }&14,000,000\
\end{array}$
 Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000. A database valued at $656,000 was recognized and amortized over five years.
During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment.
What is the amount of goodwill resulting from this acquisition?

Thomas Inc Kuried Co Acquired All of the Voting Common Stock of Thomas