Question

Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $30,000,000 in cash The book values and fair values of Iceberg's assets and liabilities were as follows: Current sets Property, plant, and equipment Other assets Current liabilities Long-telsabilities Book ValuePair Value $11, 400,000 $14,400,000 20, 200,000 26,200,000 3,400,000 4.400,000 2,800,000 7,800,000 13, 200,000 12, 200,000 Required: Calculate the amount paid for goodwill. (Enter your answer in millions (i.e. 1,000,000 should be entered as 1).) Amount paid for goodwill million

Answer 1

	Total Purchase Consideration		$   3,00,00,000
Less:	Net Assets acquired:
	Current assets	$         1,44,00,000
	Plant assets	$         2,62,00,000
	Other assets	$             44,00,000
	Current Liabilities	$           -78,00,000
	Long - term liabilities	$       -1,22,00,000
	Net Assets acquired		$ -2,50,00,000
	Goodwill		$       50,00,000
	Amount paid for Goodwill	5	million

2	Double - declining balance method:-
	Double declining rate	=	(100%/ 4 years) X 2
		=	50%
					Depreciation expense	Remaining Value
	Year 1	=	$36000 X 50%	=	$           18,000	$      18,000
	Year 2	=	$18000 X 50%	=	$             9,000	$        9,000
3	Activity based method:-
	Depreciation expense	=	(Cost - Residual value) / useful Value in units
		=	($36000 - $6400) / 148000
		=	$                                        0.20
	Depreciation expense
	Year 1	=	40000 X $0.20	=	$             8,000
	Year 2	=	46000 X $0.20	=	$             9,200

If it is helpful, please rate the answer and if any doubt arises let me know