Target Inc. has 30M shares outstanding and trades at $50 per share. Target has net identifiable assets with a book value of $1,000M and a fair value of $1,200M. Acquirer Corporation purchases all of Target Inc. stock for $60 per share. How much will Acquirer record as goodwill upon acquiring Target?

Question

Quizplus · Accepted Answer

The acquisition price for Target Inc. is $60 per share, which translates to a total purchase price of $1,800M (30M shares x $60 per share).

The net identifiable assets of Target have a fair value of $1,200M, which means that the excess purchase price of $600M ($1,800M - $1,200M) will be recorded as goodwill on Acquirer's balance sheet. Therefore, the correct answer is option C) 600M.