What amount of goodwill is created on acquisition
This year, Fat purchased a 40% interest in Thin for $275,000. On the acquisition date, Thin’s shareholders’ equity was $450,000. The carrying amounts of Thin’s identifiable net assets approximated their fair values except for land, whose fair value exceeded its carrying value by $75,000. What amount of goodwill is created as a result of the acquisition?
a. $0.
b. $65,000.
c. $95,000.
See also: (Solved) Impact of Passive Cash Dividend Received
Solution
To determine the amount of goodwill created as a result of the acquisition of a 40% interest in Thin by Fat, we need to follow these steps:
Step 1: Calculate the Fair Value of Thin’s Net Assets
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