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aimtobeacpa
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Joined: 10 Dec 2009
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Posts: 657

Posted: 20 Jul 2010 at 17:49 \| IP Logged

birk co purchased 30% of sled co's outstanding common stock on dec 31 for 200000.On that date,sled's equity was 500000, and the fair value of its net assets was 600000.On dec 31, wht amount of goodwill should birk attribute to this acquisition? ans 20000

plz how to solve this?

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amu7
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Joined: 22 May 2009
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Posted: 20 Jul 2010 at 18:14 \| IP Logged

Since Birk holds 30% of Sled, it will account for the investment by equity method. Acquisition price is 200,000 for 30% share.

Book value attributable to B's investment = 500,000*30%=150,000
Fair value attributable to B's investment = 600,000*30%=180,000
so step up to FV = 30,000

So now you have Equity as 150K+FV adj as 30K= Total of 180K
So balance is goodwill = 200,000-180,000=20,000

aimtobeacpa
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Joined: 10 Dec 2009
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Posted: 20 Jul 2010 at 18:29 \| IP Logged

thanks..

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AUD-75
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