Question

acquired 80% of the common stock of Grunt Corp. for $1,200,000. The fair value of Grunt’s net assets was $850,000, and the book value was $600,000. The non-controlling interest shares of Grunt Corp. are not actively traded. What is the total amount of goodwill recognized at the date of acquisition?

Answer 1

Answer:

total amount of goodwill recognized at the date of acquisition is 650000

Explanation:

given data

ownership = 80%

common stock = $1,200,000

net assets = $850,000

book value = $600,000

to find out

total amount of goodwill recognized at the date of acquisition

solution

we know here goodwill of controlling interest is

goodwill of controlling interest = common stock - ( net asset × ownership )

put here value

goodwill of controlling interest =  1,200,000 - ( 850,000 × 80% )

goodwill of controlling interest = 520000

and total amount of goodwill recognized at the date of acquisition

will be

total amount  =  $\frac{goodwill interest}{ownership}$

total amount  =  $\frac{520000}{0.80}$ = 650000

so total amount of goodwill recognized at the date of acquisition is 650000