Assume that the fair values of the investee's net assets approximated the recorded book values of the investee's net assets, exc
ept the fair value of the investee's identifiable noncurrent assets is $40,000 higher than book value. In addition, the investee's pre-transaction tax bases in its individual net assets approximate their reported book values. This difference relates entirely to tax-deductible items. Assume the marginal tax rate is 40% for the investor and investee. What amount of goodwill should be reported in the investor's consolidated balance sheet prepared immediately after this business combination
1 answer:
Answer:
I could not find the exact details related to this question so here is a similar question to guide you.
Goodwill = Acquisition Price - Net book value (Investee)
= 75,000 - ( Assets - Liabilities)
= 75,000 - ( 90,000 - 40,000)
= $25,000
Identifiable noncurrent assets is overstated by $10,000 however. This will have to be adjusted for tax and then removed from Goodwill to find the Net goodwill that should be reported in the investor's consolidated balance sheet prepared immediately after this business combination.
= 10,000 ( 1 - 40%)
= $6,000
Net Goodwill = 25,000 - 6,000
<h2>= $19,000</h2>
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<u>Given:</u>
Farmer's price = $1
Miller's price = $3
Baker's price = $6
<u>To find:</u>
The value added by the miller
<u>Solution:</u>
From the given, we can interpret that after purchasing from the farmer, the miller turns the wheat into flour by grinding and he sells the wheat flour to the baker.
This means that the miller added the cost of grinding with the purchasing cost. We can calculate the cost added by miller by subtracting the farmer's price from the miller's price that is
Therefore, the value added by the miller is $2.