Dennis Company purchases Miles Company for $5,000,000 cash on January 1, 2015. The book value of Miles Company's net assets reported on its December 31, 2014 financial statement was $3,800,000. An analysis indicated that the fair value of Miles's tangible assets exceeded the book value by $600,000, and the fair value of identifiable intangible assets exceeded book value by $320,000. Determine the fair value of identifiable net assets used to record goodwill.

Question

Quizplus · Accepted Answer

The fair value of identifiable net assets is calculated by adjusting the book value of net assets for the differences between the fair values and book values of tangible and intangible assets. The book value of net assets is $3,800,000, the adjustment for tangible assets is $600,000, and the adjustment for intangible assets is $320,000. Therefore, the fair value of identifiable net assets is $3,800,000 + $600,000 + $320,000 = $4,720,000.

Dennis Company Purchases Miles Company for $5,000,000 Cash on January