Sparky paid $2,170,000 to acquire Medifast, a small start-up company, which became a division of Sparky....
Sparky paid $2,170,000 to acquire Medifast, a small start-up company, which became a division of Sparky. Medifast reported the following book values and fair values for their balance sheet at the time of acquisition:
Book Value Fair Value
Cash $ 36,000 $ 36,000
Receivables 100,437 100,400
Plant & Equip (net) 640,275 654,200
Patents (remaining life 16 yrs) 60,000 854,000
Trademarks 14,652 187,450
Payables 58,900 58,900
*Sparky intends to continuously renew the trademark registration.
Required: Determine the amount of Goodwill (if any) that Sparky should record as a result of this business combination:
Homework Answers
| Cash | 36000 |
| Receivables | 100400 |
| Plant & Equip (net) | 654200 |
| Patents | 854000 |
| Trademarks | 187450 |
| Total fair value of assets | 1832050 |
| Less: Payables | 58900 |
| Net fair value of assets | 1773150 |
| Total Consideration paid | 2170000 |
| Less: Net fair value of assets | 1773150 |
| Amount of Goodwill | 396850 |
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