The following balance sheets were reported on January 1,2016,for Wood Company and Rose Company:
Required:
Appraisals reveal that the inventory has a fair value $180,000,and the equipment has a current value of $615,000.The book value and fair value of liabilities are the same.Assuming that Wood Company wishes to acquire Rose for cash in an asset acquisition,determine the following cutoff amounts:
A.The purchase price above which Wood would record goodwill.
B.The purchase price at which Wood would record a $50,000 gain.
C.The purchase price below which Wood would obtain a "bargain."
D.The purchase price at which Wood would record $75,000 of goodwill.

Question

The following balance sheets were reported on January 1,2016,for Wood Company and Rose Company:
  Required:
Appraisals reveal that the inventory has a fair value $180,000,and the equipment has a current value of $615,000.The book value and fair value of liabilities are the same.Assuming that Wood Company wishes to acquire Rose for cash in an asset acquisition,determine the following cutoff amounts:
A.The purchase price above which Wood would record goodwill.
B.The purchase price at which Wood would record a $50,000 gain.
C.The purchase price below which Wood would obtain a "bargain."
D.The purchase price at which Wood would record $75,000 of goodwill.

Quizplus · Accepted Answer

The Answer of The following balance sheets were reported on January 1,2016,for Wood Company and Rose Company:
  Required:
Appraisals reveal that the inventory has a fair value $180,000,and the equipment has a current value of $615,000.The book value and fair value of liabilities are the same.Assuming that Wood Company wishes to acquire Rose for cash in an asset acquisition,determine the following cutoff amounts:
A.The purchase price above which Wood would record goodwill.
B.The purchase price at which Wood would record a $50,000 gain.
C.The purchase price below which Wood would obtain a "bargain."
D.The purchase price at which Wood would record $75,000 of goodwill.

The Following Balance Sheets Were Reported on January 1,2016,for Wood