The balance sheet of Mini Company was as follows immediately before it was acquired b Maxi Company: On January 1, 2010, Maxi Company paid $350,000 in cash for 100% of the outstanding common stock of Mini Company. The current market value of Mini Company's plant and equipment was $140,000 on the date of acquisition. If the market value and book value ar the same for Mini's remaining assets, what was the amount of goodwill purchased by Max Company?

Question

The balance sheet of Mini Company was as follows immediately before it was acquired b Maxi Company:  On January 1, 2010, Maxi Company paid $350,000 in cash for 100% of the outstanding common stock of Mini Company. The current market value of Mini Company's plant and equipment was $140,000 on the date of acquisition. If the market value and book value ar the same for Mini's remaining assets, what was the amount of goodwill purchased by Max Company?

Quizplus · Accepted Answer

To find the goodwill purchased, we need to calculate the total consideration paid by Maxi Company and subtract the fair market value of Mini Company's identifiable assets.
Total consideration paid: $350,000
Fair market value of identifiable assets (plant and equipment): $140,000
Identifiable net assets: $110,000 ($250,000 - $140,000)
Goodwill purchased: $240,000 ($350,000 - $110,000)
Therefore, the amount of goodwill purchased by Maxi Company was $240,000, which is option B, not any other options.

The Balance Sheet of Mini Company Was as Follows Immediately