Unit 14 - Business Combinations and Consolidating Financial Reporting

Question 1

Accounting for Business Combinations - Acquisition Method

How do you calculate goodwill (acquisition method)?

Answer 1

Goodwill is the excess of (1) the sum of the acquisition-date fair values of
(a) the consideration transferred ($600,000),
(b) any noncontrolling interest in the acquiree ($0), and
(c) the acquirer’s previously held equity interest in the acquiree ($0) over (2) the net of the acquisition-date fair values of the identifiable assets acquired ($850,000) and liabilities assumed ($350,000).