Peanut Entity acquires 25% of the stock of Salt Entity for $200,000 (enough to give Peanut a significant influence over Salt). Salt Entity has $1,200,000 assets and $500,000 in liabilities. The fair value of the assets of the identifiable assets is $770,000 (due to an undervaluation of land by $20,000, PP&E (useful life 10 years) undervalue by $20,000, a 4-year, non-compete agreement worth $50,000, and inventory overvalued by $20,000. How much goodwill should be recognized? And what will be the amortization of the differential in the first year.

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The Answer of Peanut Entity acquires 25% of the stock of Salt Entity for $200,000 (enough to give Peanut a significant influence over Salt). Salt Entity has $1,200,000 assets and $500,000 in liabilities. The fair value of the assets of the identifiable assets is $770,000 (due to an undervaluation of land by $20,000, PP&E (useful life 10 years) undervalue by $20,000, a 4-year, non-compete agreement worth $50,000, and inventory overvalued by $20,000. How much goodwill should be recognized? And what will be the amortization of the differential in the first year.

Peanut Entity Acquires 25% of the Stock of Salt Entity