Question

On July 1, 2012, an acquiring company Corp. paid $2,200,000 for 100% of the outstanding common stock of an investee company in a transaction that qualifies as a business combination. Immediately preceding the transaction, the investee company had the following condensed balance sheet: Pre-acquisition amounts reported on investee's balance sheet Current assets $300,000 Property and equipment, net 2,800,000 Liabilities 1,500,000 Equity 1,600,000 The acquisition-date fair value of the property and equipment was $440,000 more than its carrying amount. For all other assets and liabilities, the pre-acquisition amounts reported on investee's balance sheet were equal to their respective fair values. Investment accounting by parent before consolidation What amount of goodwill related to the acquisition of the investee must the acquiring company report in pre-consolidation parent-only balance sheet immediately following the acquisition of investee company common stock? $160,000 $0 $440,000 $600,000

Answer 1

	The aquiring company will not recognise any goodwill in it's 'Parent only' balance sheet. As per the guideline of the ASC 805, goodwill be recognised only in the consolidated balance sheet.
	Hence correct answer is $0
	Note: Goodwill to be recognised in 'Consolidated Balance sheet'
	Current assets	$300,000
	Equipment	$3,240,000
	Liabilities	-$1,500,000
	identifiable net assets	$2,040,000
	Purchase consideration	$2,200,000
	Goodwill to be reported in "Consolidated Balance sheet".	$160,000