Postage Corporation acquired 75 percent of Stamp Corporation's common stock on December 31,20X8,for $300,000.The fair value of the noncontrolling interest at that date was determined to be $100,000.Stamp's balance sheet immediately before the combination reflected the following balances:
A careful review of the fair value of Stamp's assets and liabilities indicated that inventory,land,and buildings and equipment (net)had fair values of $65,000,$100,000,and,$300,000 respectively.Goodwill is assigned proportionately to Postage and the noncontrolling shareholders.
-Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?
A)$0
B)$120,000
C)$65,000
D)$20,000

Question

Postage Corporation acquired 75 percent of Stamp Corporation's common stock on December 31,20X8,for $300,000.The fair value of the noncontrolling interest at that date was determined to be $100,000.Stamp's balance sheet immediately before the combination reflected the following balances:
  A careful review of the fair value of Stamp's assets and liabilities indicated that inventory,land,and buildings and equipment (net)had fair values of $65,000,$100,000,and,$300,000 respectively.Goodwill is assigned proportionately to Postage and the noncontrolling shareholders.
-Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet immediately following the acquisition?
A)$0 
B)$120,000 
C)$65,000 
D)$20,000

Quizplus · Accepted Answer

When calculating goodwill, we first need to determine the fair value of the assets and liabilities acquired in the acquisition. 
Fair Value of Assets: 
- Inventory: $65,000 
- Land: $100,000 
- Buildings and Equipment (net): $300,000 
Total Fair Value of Assets: $465,000

We then need to determine the total consideration paid for the acquisition: 
- 75% of Stamp Corporation's common stock: $300,000

Finally, we can calculate the goodwill as follows:

Total Consideration Paid - Fair Value of Net Assets Acquired 
$300,000 - (75% of $465,000) 
$300,000 - $348,750 
Goodwill: $65,250

Since goodwill is assigned proportionately to Postage and the noncontrolling shareholders, we need to divide this amount by 2:

$65,250 / 2 
Goodwill Reported in Consolidated Balance Sheet: $32,625

Therefore, the answer is option C) $65,000.

Postage Corporation Acquired 75 Percent of Stamp Corporation's Common Stock