Use the following information for questions
Jessup Corp.will acquire a controlling stake in the outstanding shares of Parasol Inc.for
$9.2 million in cash.
-Assuming the fair value of Parasol's net-assets is $10.2 million, and Jessup acquired a 75% share, goodwill can be calculated as
A)$1,243,000
B)$1,000,000
C)$1,550,000
D)$750,000

Question

Use the following information for questions 
Jessup Corp.will acquire a controlling stake in the outstanding shares of Parasol Inc.for
$9.2 million in cash.
-Assuming the fair value of Parasol's net-assets is $10.2 million, and Jessup acquired a 75% share, goodwill can be calculated as
A)$1,243,000
B)$1,000,000
C)$1,550,000
D)$750,000

Quizplus · Accepted Answer

Goodwill is calculated as the difference between the purchase price and the fair value of the net assets acquired. In this case, the purchase price is $9.2 million for a 75% share, which means the total value of Parasol Inc. is $12.27 million. The fair value of net assets is $10.2 million, so the goodwill is $12.27 million - $10.2 million = $2.07 million. However, since Jessup only acquired a 75% share, the amount of goodwill attributable to them is 75% of $2.07 million, which is $1.55 million (Option C).

Use the Following Information for Questions