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anygoal [31]
3 years ago
5

Large purchased all of Small's voting stock for $11 million when Small's total owners' equity was $4 million. The book value and

fair value of Small's liabilities equal $3 million. However, the fair value of Small's total assets equals $9 million. What amount of goodwill is recorded by Large (in millions)
Business
1 answer:
hoa [83]3 years ago
8 0

Answer:

The amount of goodwill that is recorded by Large is $5 million

Explanation:

Goodwill is the excess of price consideration paid to acquire controlling stake in a company over the fair value of the company's net assets.

Net assets in the sense implies the fair value of total assets less fair value of liabilities.

Fair value of total assets is $9 million

Fair value of liabilities    is $3 million

As a result net assets upon acquisition  is $6 million($9 million less $3 million)

Since the consideration paid in acquiring Small's voting stake is $11 million, goodwill is $5 million($11 million less $6 million).

The $ 5 million is the excess of purchase consideration over the fair value of Small's net assets as at the date of acquisition

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Answer:

The journal entries are recorded below;

Explanation:

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11. Accounts Payable Dr.$400

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    Discount Allowed Dr.$19

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16.  Accounts Payable   Dr.$6,700

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19. A/R Art Co       Dr.$1,200

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Cost of Goods Sold   Dr.$800

Inventory                    Cr.$800

21. Allowance on Goods Dr.$200

   A/R Art Co.                   Cr.$200

24.  Accounts Payable     Dr.$2,400

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      Inventory                     Cr.$48

30.   Bank     Dr.$1,000

       A/R Art Co.(1,200-200)  Cr.$1,000

31. A/R Creek Co.   Dr.$6,900

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Cost of Goods Sold    Dr.$5,500

Inventory                    Cr.$5,500      

7 0
3 years ago
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On June 1, Edward visited a bicycle sales and service center. Edward spotted a used bike he liked and was told by the dealer tha
Salsk061 [2.6K]

Answer:

"Yes" will be the correct response.

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Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition
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End of one year price = $80 + $6.20

End of one year price = $86.20

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I think its either a) or d) Tell me if I’m wrong

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