Question

Hepner Corporation has the following stockholders' equity accounts:

Preferred stock (6% cumulative dividend) $560,000
Common stock 810,000
Additional paid-in capital 360,000
Retained earnings 1,010,000
The preferred stock is participating. Wasatch Corporation buys 80 percent of this common stock for $1,660,000 and 70 percent of the preferred stock for $630,000. The acquisition-date fair value of the noncontrolling interest in the common shares was $415,000 and was $270,000 for the preferred shares. All of the subsidiary's assets and liabilities are viewed as having fair values equal to their book values.

What amount is attributed to goodwill on the date of acquisition?

Answer 1

Answer:

$235,000

Explanation:

The computation of the goodwill amount attributed is shown below:

Common stock $1,660,000  

Preferred stock $630,000  

Non controlling interest in common stock $415,000  

Non controlling interest in preferred stock $270,000  

Fair value at acquisition date                 $2,975,000  

Book value  $2,740,000 (560,000 + $810,000 + $360,000 + $1,010,000)

Goodwill                        $235,000