Sheetz Company is purchased by Pulsar Corporation, at an acquisition cost that is $25,000,000 greater than the fair value of the identifiable net assets acquired. One of the assets acquired is a building, originally valued at $15,000,000 at the date of the purchase. Six months after the acquisition, it is discovered that the building was actually worth $7,000,000 at the date of acquisition.
What entry is made to reflect this new information?

Question

Quizplus · Accepted Answer

The overvaluation of the building should be adjusted against goodwill, as goodwill was initially recorded due to the excess acquisition cost over the fair value of net assets.

Sheetz Company Is Purchased by Pulsar Corporation, at an Acquisition