Big Ltd has purchased 100 per cent of Little Ltd for a cash payment of $800,000. The additional costs to Big Ltd to complete the purchase were $3,000. An extract from the balance sheet for Little Ltd at the date of acquisition shows:

Additional information:
The assets and liabilities of Little Ltd are stated at fair value except that:
Land and buildings have a fair value of $300,000
Accounts receivable have a fair value of $20,000
Little owns a licence that has not been recorded in the accounts. Its fair value is $150,000.
What is the amount of purchased goodwill, if any, that has been acquired by Big Ltd?

Question

Big Ltd has purchased 100 per cent of Little Ltd for a cash payment of $800,000. The additional costs to Big Ltd to complete the purchase were $3,000. An extract from the balance sheet for Little Ltd at the date of acquisition shows:

Additional information:
The assets and liabilities of Little Ltd are stated at fair value except that:
Land and buildings have a fair value of $300,000
Accounts receivable have a fair value of $20,000
Little owns a licence that has not been recorded in the accounts. Its fair value is $150,000.
What is the amount of purchased goodwill, if any, that has been acquired by Big Ltd?

Quizplus · Accepted Answer

The Answer of Big Ltd has purchased 100 per cent of Little Ltd for a cash payment of $800,000. The additional costs to Big Ltd to complete the purchase were $3,000. An extract from the balance sheet for Little Ltd at the date of acquisition shows:

Additional information:
The assets and liabilities of Little Ltd are stated at fair value except that:
Land and buildings have a fair value of $300,000
Accounts receivable have a fair value of $20,000
Little owns a licence that has not been recorded in the accounts. Its fair value is $150,000.
What is the amount of purchased goodwill, if any, that has been acquired by Big Ltd?

Big Ltd Has Purchased 100 Per Cent of Little Ltd