X Company acquires all of Y Company's assets and liabilities for $15,000,000 in cash. The...
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Accounting
X Company acquires all of Y Company's assets and liabilities for $15,000,000 in cash. The fair values of Y's assets and liabilities approximate their book values, except Y has developed technology valued at $8,000,000 that is not reported on its balance sheet, and its buildings are overvalued by $7,000,000. Here is Y's balance sheet just prior to the acquisition:
Y Company
Current assets
$ 500,000
Land, buildings, and equipment
9,500,000
Total assets
$10,000,000
Liabilities
$ 6,000,000
Common stock, $1 par
100,000
Additional paid-in capital
2,915,000
Retained earnings
1,000,000
Treasury stock
(20,000)
Accumulated other comprehensive income
5,000
Total liabilities and equity
$10,000,000
How much goodwill is recognized for this acquisition?
A. $12,000,000
B. $ 4,000,000
C. $10,000,000
D. $16,000,000
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