On December 31,20X1,Pine Corporation acquired 100 percent ownership of Sap Corporation.On that date,Sap reported assets and liabilities with books values of $450,000 and $200,000,respectively,common stock outstanding of $150,000,and retained earnings of $100,000.The book values and fair values of Sap's assets and liabilities were identical except for land which had increased in value by $15,000 and inventories which had decreased by $5,000.
-Based on the preceding information,what amount of goodwill will be reported in the consolidated balance sheet on the acquisition date if the acquisition price was $280,000?
A)$10,000
B)$20,000
C)$30,000
D)$35,000

Question

Quizplus · Accepted Answer

The fair value of Sap's net assets is $260,000 ($450,000 assets - $200,000 liabilities + $15,000 land increase - $5,000 inventory decrease). The acquisition price is $280,000, so goodwill is $280,000 - $260,000 = $20,000.

On December 31,20X1,Pine Corporation Acquired 100 Percent Ownership of Sap