Target Inc. has 30 million shares outstanding and trades at $50 per share. Target has net identifiable assets with a book value of $1,000 million and a fair value of $1,200 million. Acquirer Corporation purchases all of Target Inc. stock for $60 per share. How much will Acquirer records as goodwill upon acquiring Target?

Question

Quizplus · Accepted Answer

Acquirer Corporation will pay a total of $1,800 million to acquire all of Target Inc. stock (30 million shares x $60 per share). The fair value of Target's net identifiable assets is $1,200 million, so the excess purchase price over the fair value of net identifiable assets represents goodwill.

Calculation: 
Purchase Price - Fair Value of Net Identifiable Assets = Goodwill
$1,800 million - $1,200 million = $600 million

Therefore, the answer is C)$600 million.