Question

Wilkins Inc. acquired 100% of the voting common stock of Granger Inc. on January 1, 2021. The book value and fair value of Granger’s accounts on that date (prior to creating the combination) are as follows, along with the book value of Wilkins’s accounts: Wilkins Book Value Granger Book Value Granger Fair Value Retained earnings, 1/1/21 $ 250,000 $ 240,000 Cash and receivables 170,000 70,000 $ 70,000 Inventory 230,000 180,000 210,000 Land 320,000 220,000 240,000 Buildings (net) 480,000 240,000 280,000 Equipment (net) 120,000 90,000 90,000 Liabilities 650,000 440,000 430,000 Common stock 360,000 80,000 Additional paid-in capital 60,000 40,000 Assume that Wilkins issued 13,000 shares of common stock, with a $5 par value and a $46 fair value, to obtain all of Granger’s outstanding stock. In this acquisition transaction, how much goodwill should be recognized?

Multiple Choice

• $138,000.

• $178,000.

• $98,000.

• $94,000.

• $0.

Answer 1

Calaculation of amount of goodwill that should be recognized on acquistion:

Goodwill: The amount which is excess of Consideration paid over the fair value of net identifiable assets.

Given

Fair value of Consideration paid on acquisition

= 13000 common shares with fair value of $46 each

= 13000×$46

= $598000

Amount of Goodwill:

.	($)	($)
Fair value of consideration paid		$598000
Less: Fair value of net assets
Cash and Receivables	$70000
Inventory	$210000
Land	$240000
Building(net)	$280000
Equipment(net)	$90000
Liabilities	($430000)	($460000)
Goodwill		$138000

Therefore,

The correct option is

• $138000

______×______

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