CFA Practice Question

There are 334 practice questions for this study session.

CFA Practice Question

Octopus Inc. acquires Target. Target has a book value of $25 million and a market value of $47.6 million. Octopus will pay $60 million in Octopus common stock to acquire all outstanding shares. Balance sheet information for Target includes:

If the acquisition method is used, goodwill will be recorded for:
A. $0
B. $12.4 million.
C. $20.0 million.
Explanation: 60-47.6

User Contributed Comments 5

User Comment
HenryQ How about the 40m mkt value?
Rotigga HenryQ, I think the point this question was making is that there is a difference between Market Value and Fair Market Value. FMV is used to calculate goodwill.
Yurik74 Why it's a difficult question?
dblueroom Yurik, that's also the question popped up in my head.
broadex Goodwill= purchase consideration less fair value of assets acquired.
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