Asked by Luthando Bongobi on Apr 25, 2024
Verified
Arnez Ltd. acquired 70% of Bedard Ltd. At the acquisition date, Bedard's net identifiable assets had a carrying value of $825,000 and a fair value of $1,000,000. Arnez paid $910,000 for the acquisition. Under the parent-company extension method, what amount should be reported for goodwill on Arnez's consolidated statement of financial position?
A) $210,000
B) $300,000
C) $332,500
D) $475,000
Parent-Company Extension Method
An accounting technique where a parent company extends its financial statements to include the financial activities of its subsidiary as if they were its own.
Consolidated Statement
A financial statement that integrates the assets, liabilities, and operating results of a parent company and its subsidiaries.
Carrying Value
The value at which an asset is recognized on the balance sheet, factoring in depreciation, amortization, and impairment charges.
- Calculate the amount of goodwill using the parent-company extension method.
Verified Answer
AG
Abraham Gonzalez7 days ago
Final Answer :
A
Explanation :
Goodwill is calculated as the excess of the purchase consideration over the acquirer's share of the fair value of the net identifiable assets of the acquiree. Arnez paid $910,000 for a 70% stake, and the fair value of Bedard's net identifiable assets was $1,000,000. Arnez's share of the fair value is 70% of $1,000,000 = $700,000. The goodwill is therefore $910,000 (purchase consideration) - $700,000 (fair value of net identifiable assets acquired) = $210,000.
Learning Objectives
- Calculate the amount of goodwill using the parent-company extension method.