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Basic Question 3 of 20
On June 30th, 2009, Plum Corporation acquired the stock of Strawberry Company. Plum purchased for cash all 200,000 shares of Strawberry's common stock for $18 per share. On this date, the carrying value of Strawberry's net assets on their balance sheet was $2,500,000 and the fair market value of their plant assets exceeded its carrying value by $500,000. What amount of goodwill should Plum report on its 6/30/2009 balance sheet related to this transaction?
B. $500,000.
C. $600,000.
A. $0.
B. $500,000.
C. $600,000.
User Contributed Comments 2
| User | Comment |
|---|---|
| johnowens | this is very simple. Purchase Cost = (18)(200,000) = $3.6m Fair Value of Company's Assets = 2.5m + 500k = $3m Therefore Goodwill = $600k |
| yxten1 | 1. Find out Acquisition price (180,000 * $18) 2. Acquisition Price (-) Book Value of acquiress (3,600,000 - 2,500,000) 3. Adjust acquiree book value to fair value (500,000) 4. Goodwill = 3,600,000 - 2,500,000 - 500,000 = 600,000 |
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Learning Outcome Statements
describe the classification, measurement, and disclosure under International Financial Reporting Standards (IFRS) for 1) investments in financial assets, 2) investments in associates, 3) joint ventures, 4) business combinations, and 5) special purpose and variable interest entities;
distinguish between IFRS and US GAAP in their classification, measurement, and disclosure of investments in financial assets, investments in associates, joint ventures, business combinations, and special purpose and variable interest entities;
analyze how different methods used to account for intercorporate investments affect financial statements and ratios.
CFA® 2025 Level II Curriculum, Volume 2, Module 10.