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acquired the business Data Systems for $320,000 cash and assumed all liabilities at the date of purchase
acquired the business Data Systems for $320,000 cash and assumed all liabilities at the date of purchase. Data’s books showed Equipment of $260,000, Accounts Payable of $40,000, and Common Stock of $220,000. An appraiser assessed the fair market value of the equipment at $250,000 at the date of acquisition. Just prior to the acquisition, Arizona Corp. had $450,000 in Cash and Common Stock.
At what value will Arizona required the equipment?
What value did Arizona assign to goodwill?
How much Goodwill is amortized or written-off in the year of acquisition?
Expert Solution
Goodwill valuation :Sr noParticularsAmount1cost of acquiring the business3200002Market value of equipment2500003common stock04Total Asset value (2+3)250000Liability:5Account Payables400006Busines value (4-5)210000AGoodwill ((1)-(6))110000BValue of equiment to be considered is it fair value250000CGoodwill Amortization is not Allowed as per US GAAP .Not AllowedNote :Since fair value of common stock is not given it is considered absolute
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