Question

3. Thomas Inc. had the following stockholders' equity accounts as of January 1, 2013: $ Preferred stock-$90 par value, nonvoting and nonparticipating: 9% cumulative dividend Common stock - $25 par value Retained earnings 2,700,000 5,600,000 14,000,000 Kuried Co. acquired all of the voting common stock of Thomas on January 1, 2013, for $20,656,000. The preferred stock remained in the hands of outside parties and had a fair value of $3,060,000. A database valued at $656,000 was recognized and amortized over five years. During 2013, Thomas reported earning $630,000 in net income and paid $504,000 in total cash dividends. Kuried used the equity method to account for this investment. What is the amount of goodwill resulting from this acquisition? Consideration transferred for 100% interest in common stock Non-controlling interest in preferred stock (100%): Total fair value of Thomas 1/1/13 Book value Excess acquisition-date fair value over book value

Answer 1

Goodwill is recorded in the books only when some consideration in money or money's worth has been paid for it. Goodwill is the excess of the fair value of Net assets of business over its book value.

Calculation for goodwill is as follows:

Solution o- calceolation For Valuation of Goodwill Amount Amount particulars in & 9) Consideration transferred for 20656000 1001 interest in common stock b) Non conpolling interest in 3. hosoo Preferred stock (1004) c) To the Feeir value of Thomas 23716000 Oo-01-13 d) Book value of Thomas :- 22300 000 Preferred stock 2700 100 Commen stock 5600,000 Retelned Earnings 14 000,00 e) Excess acquisition date Fair 1416000 value over book Value (C-d) f) Assigned to Database 656ooo 9 Amount of Good will 7 to 1000 Ics Scanned with CamScanner