Question

Dish Corporation acquired 100 percent of the common stock of Toll Company by issuing 10,000 shares of $10 par common stock with a market value of $60 per share. Summarized balance sheet data for the two companies immediately preceding the acquisition are as follows: Dish Corp Toll Co. Book Value Fair Value Book Value Fair Value Total Assets $1,200,000 $1,500,000 $900,000 $1,300,000 Total Liabilities $800,000 $700,000 $600,000 $750,000 Total Stockholders' Equity 400,000 $300,000 $1,200,000 $900,000 Required: Determine the dollar amounts to be presented in the consolidated balance sheet for (1) total assets, (2) total liabilities, and (3) total stockholders' equity. How do I calculate goodwill to determine the dollar amounts for total assets.
How do I find/calculate the goodwill required to answer (1) dollar amount for total assets

Answer 1

Answer:

a) $2,550,000

b) $1,550,000

c)$1,000,000

d) Goodwill is $50,000

Explanation:

Part A) Determine the total Assets of the business to be used in the consolidated balance sheet

The consolidated Total Asset for Dish Corporation and Toll Company is as follows:

The Book value of the assets of Dish + Toll's assets fair value + The goodwill

How to calculate the goodwill

First, dish paid the following for acquiring Toll = $10,000 @ $60 = $600,000

Secondly, The net worth of Toll at the time was = $1,300,000- $750,000 (Assets- Liabilities)= $550,000

The Good will = $600,000- $550,000

= $50,000

Calculate Consolidated Asset

The Book value of the assets of Dish + Toll's assets fair value + The goodwill

= $1,200,000 + $1,300,000 + $50,000 = $2,550,000

Part b) Total Liabilities

The book value of Dish Corporation Liabilities + The Fair value of Toll Liabilities

= $800,000 + $750,000 = $1,550,000

Part c) The total or consolidated Equity =

The formula for equity at this point = The Total Assets (Part A) - The Total Liabilities (Part b)

= $2,550,000 - $1,550,000

=$1,000,000