Question

Today, Company "A" purchases 100% of Company B Common Stock and assumes all of the outstanding Company B Liabilities. Immediately Before the acquisition, Company B had reported the following Balance Sheet Totals: Total Assets = $2,800 Total Liabilities = $2,100 Total Equity = $700 Immediately after the Acquisition, Company A had to consolidate Company B into its financial books. This involves the Purchase Price Allocation problem. Here is the information you have to work with: Company A paid $3,400 for the equity of Company B. The Liabilities of Company B were re-valued to current fair value at $1,800 The Acquired Plant Property and Equipment was valued at $3,000 fair market value Acquired Research and Development as well as Patents were valued at $600 Compute the value of Goodwill recognized in this acquisition.

Answer 1

Purchase price of Company B		3400
Less: Net assets acquired
FMV of plant, property, and equipment	3000
FMV of intangible assets	600
Total assets acquired	3600
Less: FMV of Liabilities	1800	1800
Goodwill $		1600