Use the following information to answer bellow Questions :
Peregrine Company acquires all of the voting stock of Falcon Corporation for $65,000, in a merger. Falcon's balance sheet reports the following asset and liability balances: $$\begin{array} { l r }
\text { Current assets } & \$ 15,000,000 \
\text { Plant \& equipment } & 60,000,000 \
\text { Current liabilities } & 10,000,000 \
\text { Long-term debt } & 40,000,000
\end{array}$$
-Now assume Falcon's plant and equipment is overvalued by $15,000,000. How much goodwill does Peregrine report at the date of acquisition?

Question

Use the following information to answer bellow Questions :
Peregrine Company acquires all of the voting stock of Falcon Corporation for $65,000, in a merger. Falcon's balance sheet reports the following asset and liability balances: $$\begin{array} { l r } 
\text { Current assets } & \$ 15,000,000 \
\text { Plant \& equipment } & 60,000,000 \
\text { Current liabilities } & 10,000,000 \
\text { Long-term debt } & 40,000,000
\end{array}$$
-Now assume Falcon's plant and equipment is overvalued by $15,000,000. How much goodwill does Peregrine report at the date of acquisition?

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of the acquired net assets. In this case, the fair value of the acquired net assets is $60,000,000 (current assets + plant & equipment - current liabilities - long-term debt). Since the plant & equipment is overvalued by $15,000,000, the fair value of the acquired net assets is actually $45,000,000. Therefore, the goodwill is $65,000,000 - $45,000,000 = $20,000,000.

Use the Following Information to Answer Bellow Questions : Peregrine

Use the Following Information to Answer Bellow Questions :
Peregrine