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Homework answers / question archive / University of Notre DameACCT 304 Huang Inc has 50,000 shares of $3 par value stock outstanding
University of Notre DameACCT 304
Huang Inc has 50,000 shares of $3 par value stock outstanding. Ouyang Inc acquired 10,000 of Huang's shares on Jan 1, 20X1, for $100,000 when Huang's net assets had a total fair value of $400,000. On July 1, 20X1, Ouyang bought an additional 20,000 shares for $12 per share. Although Huang's shares were selling in the $11 range around July 1, 20X1. If Huang's identifiable net assets had fair value of $550,000 at July 1, 20X1,
how much goodwill should Ouyang Report in the consolidated statement?
Answer is
$150000
Step-by-step explanation
Since the Goodwill is being calculated for Ouyang and not for Huang so the net change in the assets will be considered for the calculation of goodwill.
Goodwill can be calculated as follows.
Goodwill = June asset 20X1 - January asset 20X1
= $ 550,000 - $ 400,000
= $ 150,000
So, the total goodwill recognized by Ouyang is $ 150,000
