Question

A company pays $95,000 in cash and stock to acquire 80% of the voting stock of another company. The fair value of the noncontrolling interest is $21,250. The book value of the acquired company is $66,250, and no revaluations of acquired identifiable net assets are necessary. What percentage of total goodwill is allocated to the controlling interest, following U.S. GAAP

Answer 1

Answer:

$50,000

Explanation:

Goodwill = amount of money paid for 80% of the stocks + fair value of non-controlling interest - fair value of assets = $95,000 + $21,250 - $66,250 = $50,000

Goodwill will only be allocated to the company that is carrying out the acquisition since goodwill exists due to the intervention of the outside company.