When a subsidiary reports goodwill on their balance sheet, the subsidiary's
in a previous business combination in which they were the
When acquiring a subsidiary with goodwill, the acquisition differential is
as if the goodwill had been written off by the subsidiary, even
though in fact this is not the case.
The terms of a business combination may require an additional cash
payment, or an additional share issue dependent on some specified future
event. This is known a contingent consideration
Betty Developers Corp. purchased the common shares of Barb Materials Inc.
for $550,000. However, the fair value of Barb Materials' net assets was
$600,000. Which of the following is the journal entry to record the purchase
of shares of Barb Materials?
Dr: Investment in Bard 600000
Cr: cash 550000
Cr Gain 50000
Debit Investment in Barb Materials Inc. for $600,000; Credit Cash for
$550,000 and Gain on Bargain Purchase for $50,000.
Topaz Corp. purchased all of Zircon Corp.'s common shares on January 1,
20X1. On the acquisition date, the book value of Zircon's assets is comprised
of inventory of $45,000, land of $120,000, and equipment of $75,000. On the
acquisition date, the fair values are: inventory $55,000, land $150,000, and
equipment $80,000. Calculate the fair value increment of Zircon's assets.
Fair value increment = ($55,000 - $45,000) + ($150,000 - $120,000) +
($80,000 - $75,000) = $10,000 + $30,000 + $5,000 = $45,000.
Emerald Corp. acquires 80% of Zircon Inc.'s outstanding common shares.
Zircon Inc. reports common shares of $350,000 and retained earnings of
$200,000 on its balance sheet. Emerald's share of the book value of Zircon's
net assets is $ 440000