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(Solved) What amount of goodwill is created on acquisition

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 AssetsCorrect

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