Bargain Purchase. Repeat the requirements of BE11-17 assuming that the acquisition cost was $7,000,000.
BE11-17
Acquired Goodwill. On January 1, Buckingham Brothers acquired 100% of Julian Systems for $12,000,000. The book value of Julian’s net assets on the date of acquisition was $7,000,000. However, a detailed appraisal of Julian’s net assets revealed that its net assets were undervalued by $1,000,000. Determine the amount of goodwill or gain from a bargain purchase to be recorded on the acquisition and indicate where it should be reported on the consolidated financial statements.
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