Jones company acquired Jackson Company for $2,000,000 cash.At that time, the fair value of recorded assets and liabilities was $1,500,000 and $250,000, respectively.Jackson also had in-process research and development projects valued at $150,000 and its pension plan's projected benefit obligation exceeded the plan assets by $50,000.What was the amount of the goodwill related to the acquisition?

Question

Jones company acquired Jackson Company for $2,000,000 cash.At that time, the fair value of recorded assets and liabilities was $1,500,000 and $250,000, respectively.Jackson also had in-process research and development projects valued at $150,000 and its pension plan's projected benefit obligation exceeded the plan assets by $50,000.What was the amount of the goodwill related to the acquisition?​

Quizplus · Accepted Answer

The goodwill related to the acquisition can be calculated as follows:
Purchase price = $2,000,000
Fair value of net assets acquired = $1,500,000 - $250,000 - $150,000 - $50,000 = $1,050,000
Goodwill = purchase price - fair value of net assets acquired = $2,000,000 - $1,050,000 = $950,000
Therefore, the amount of goodwill related to the acquisition is $950,000 or choice letter D.

Jones Company Acquired Jackson Company for $2,000,000 Cash