Snowflake Corp. Penguin,Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:
Based on the information concerning Snowflake Corp.what is the value of the goodwill related to the acquisition?

Question

Snowflake Corp. Penguin,Inc.acquires 100% of the outstanding shares of Snowflake Corp.for $2,250,000 and accounts for the transaction using the purchase method.Snowflake's balance sheet at the acquisition date is as follows:
 Based on the information concerning Snowflake Corp.what is the value of the goodwill related to the acquisition?

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired.

Fair value of net assets acquired = ($1,700,000 + $450,000 + $100,000 + $150,000) = $2,400,000.

Purchase price = $2,250,000.

Goodwill = $2,250,000 - $2,400,000 = $1,325,000.

Therefore, the value of goodwill related to the acquisition is $1,325,000, which is option D.