On June 1, Cline Co. paid $954,500 cash for all of the issued and outstanding common...
On June 1, Cline Co. paid $954,500 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow: Cash $ 171,000 Accounts receivable 274,500 Capitalized software costs 307,000 Goodwill 148,000 Liabilities (156,000 ) Net assets $ 744,500 On June 1, Renn’s accounts receivable had a fair value of $213,000. Additionally, Renn’s in-process research and development was estimated to have a fair value of $241,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill?
a. $31,000.
b. $307,000.
c. $117,000.
d. $178,500.
Homework Answers
Fair value of net assets received
= (Cash 171,000 + Accounts Receivable 213,000 + Research and development 241,000 + Capitalized software cost 307,000) - Liabilities 156,000
= 776,000
Goodwill = Consideration paid - Fair value of net assets received
= 954,500 - 776,000
= $178,500
Option D
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