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Goodwill Calculation in X-Y Acquisition

X Company acquired Y Company through an asset acquisition by issuing 80,000 shares worth P8 million. Y's assets and liabilities approximated their book values except for customer lists valued at P3 million not on the balance sheet and plant assets overvalued by P5 million. The amount of goodwill recognized was P6 million, calculated as the P8 million cost minus the P2 million fair value of Y's net assets.

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113 views1 page

Goodwill Calculation in X-Y Acquisition

X Company acquired Y Company through an asset acquisition by issuing 80,000 shares worth P8 million. Y's assets and liabilities approximated their book values except for customer lists valued at P3 million not on the balance sheet and plant assets overvalued by P5 million. The amount of goodwill recognized was P6 million, calculated as the P8 million cost minus the P2 million fair value of Y's net assets.

Uploaded by

sonly amatosa
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd

3.

X Company acquires all of Y Company in an acquisition properly accounted for as an asset


acquisition. X issues 80,000 shares of common stock with a fair value of P8,000,000 for Y’s net assets.
The fair values of Y’s assets and liabilities approximate their book values, except Y has customer lists
valued at P3,000,000 that are not reported on its balance sheet, and its plant assets are overvalued by
P5,000,000. Here are the balance sheets of X and Y prior to the acquisition:

X Company Y Company

Assets P30,000,000 P10,000,000

Liabilities P16,000,000 P 6,000,000

Common stock, $1 par 1,000,000 100,000

Additional paid-in capital 9,000,000 2,900,000

Retained earnings 4,000,000 1,000,000

P30,000,000 P10,000,000

How much goodwill is recognized for this acquisition?

a. P 2,000,000
b. P 3,000,000
c. P 6,000,000
d. P 11,000,000

ANS: C

Cost P8,000,000
Fair value of net assets acquired
Reported assets P 5,000,000
Customer lists 3,000,000
Liabilities (6,000,000) 2,000,000
Goodwill P6,000,000

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