Computing Investment and Goodwill
Not what you're looking for?
The problem is circled in green in the attachment. My problems are with the first journal entry and with calculating the Goodwill.
I know the first entry to record aquisition is a debit to Investment in Net Assets of Cooper Co. account. I know that it is calculated like this (($1,000,000 * 0.258419) + ($50,000 * 10.594014)) = $788,120. I am not sure how to ge the 0.258419 or the 10.594014. I think it may have something to do with the time value of money, but I am not sure which one. I am asking someone to clarify this so that I understand this problem better.
My second question is on Goodwill. I know this is what the calculation looks like, but I don't know where these numbers came from.
Total Cost of Investment $828,120 (How was this number calculated)
I understand the rest, but would greatly appreciate some guidance on these three numbers.
Purchase this Solution
Solution Summary
Using an Excel 97-2003 spreadsheet, this solution illustrates how to compute the value of bonds selling at a discount, how to determine the value of the Investment in Subsidiary using those bonds and related costs, and how to compute the balance of Goodwill.
Solution Preview
First off, they are selling $1,000,000 in bonds. However, they are paying 10 percent per year interest when the market bears 14 percent interest. Therefore, the bonds must sell at a discount. The bond is really the present value of two amount: an regular interest stream of $25,000 every six months for the next 10 years and a lump-sum of $1,000,000 at the end of the 10 years. To compute the proceeds of the sale, we ...
Purchase this Solution
Free BrainMass Quizzes
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations
Operations Management
This quiz tests a student's knowledge about Operations Management
Organizational Behavior (OB)
The organizational behavior (OB) quiz will help you better understand organizational behavior through the lens of managers including workforce diversity.
Introduction to Finance
This quiz test introductory finance topics.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking