Homework Answers
When a company acquires another company the value of assets acquired are taken at fair value instead of book value of acquired company.
|
Fair value of all assets acquired |
$ 14,00,000.00 |
|
Less: Liabilities taken over |
$ 6,00,000.00 |
|
Net value of assets acquired |
$ 8,00,000.00 |
|
Consideration paid |
$ 12,00,000.00 |
|
Less: Net value of assets acquired (at fair value) |
$ 8,00,000.00 |
|
Value of Goodwill |
$ 4,00,000.00 |
Value of Goodwill= $400,000
Goodwill is the excess amount paid in consideration of purchase of another company.
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