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                                                Williams                                               Roberts Cash                                      160,000                                                 50,000 Inventory                            550,000                                                 160,000 Equipment                          1,500,000                                             670,000       Totals                             2,210,000                                             880,000 Totals Liabilities 740,000 280,000 c/s $20 par                          600,000                                                 300,000 other contr cap                 375,000                                                 105,000 retained earnings             495,000                                                 195,000        totals                             2,210,000                                             880,000 inventory has a FMV of 170,000 for Roberts and the...

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Accounting

                                              Williams                                              Roberts

Cash                                   160,000                                                50,000

Inventory                          550,000                                                160,000

Equipment                        1,500,000                                            670,000

     Totals                           2,210,000                                            880,000

Totals Liabilities 740,000 280,000

c/s $20par                         600,000                                               300,000

other contrcap                375,000                                                105,000

retainedearnings            495,000                                                195,000

      totals                            2,210,000                                            880,000

inventory has a FMV of 170,000 for Roberts and the equipment hasa FMV of 715,000. The book value and FMV of liabilities are thesame. Assuming Williams wishes to acquire Roberts for cash in anasset acquisition, determine the following cutoff amounts:

  1. Purchase price above which Williams would record goodwill?
  2. Purchase price which Williams would record a 60,000 gain?
  3. Purchase price below which Williams would obtain abargain?
  4. Purchase price which Williams would record 85,000 ofgoodwill?

Answer & Explanation Solved by verified expert
3.8 Ratings (781 Votes)

ROBERTS ASSETS NET MARKET VALUE:
AMOUNT
Assets:
Cash 50000
Inv. 170000
Equip 715000
Less:Liabilities -280000
Net Assets Market Value 655000
Req 1) Purchse price above which Williams would record goodwill = B/V of assets - Liabilities = 880000-280000= 600000
Req 2) Purchse price which Williams would record a 60000 gain = (B/V of assets - Liabilities)-60000 = 880000-280000-60000= 540000
Req 3) Purchse price below which Williams would obtain a bargain = Net Assets Market Value = 655000
Req 4) Purchse price which Williams would record 85000 of goodwill = (B/V of assets - Liabilities) + 85000= 880000-280000 + 85000= 685000

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