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Crystal, Incorporated: Acquisition Cost, Goodwill

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Crystal, Incorporated acquired 100 percent of the assets and liabilities of Design, Inc. by issuing its common stock in a business combination. At the time of the combination, the fair values of Design's net assets and Crystal's common stock were $440,000 and $410,000, respectively; the book value of Design's net assets was $320,000, and the par value of Crystal's stock was $160,000. Included in Design's net assets was equipment with a fair value of $300,000 and a book value of $180,000.

Question 1
Based on the information given above, the excess of Crystal's acquisition cost over the book value of Design's net assets is:
$(30,000).
$30,000.
$90,000.
$120,000.

Question 2
Based on the information given above, the amount to be reported as goodwill subsequent to the combination is:
$0.
$(30,000).
$30,000.
$90,000.

Question 3
Consider the information given above. If the total book value of Crystal's net assets is $900,000, what is the total amount of net assets of both companies combined?
$1,220,000.
$1,310,000.
$1,340,000.
$1,540,000.

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1. Based on the information given above, the excess of Crystal's acquisition cost over the book value of Design's net assets is:

Guidance:
FV of assets acquired $440,000
Fair value of consideration given $410,000 (acquisition ...

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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