Dodd Co. acquired 75% of the common stock of Wallace Corp. for $1,800,000. The fair value of Wallace's net assets was $2,100,000, and the book value was $1,900,000. The noncontrolling interest shares of Wallace Corp. are not actively traded.What amount of goodwill should be attributed to Dodd at the date of acquisition?
A) $0.
B) $75,000.
C) $150,000.
D) $225,000.
E) $300,000.

Question

Quizplus · Accepted Answer

The goodwill is the difference between the purchase price and the fair value of the net assets acquired. In this case, the purchase price is $1,800,000, the fair value of the net assets is $2,100,000, and the book value of the net assets is $1,900,000. Therefore, the goodwill is $2,100,000 - $1,800,000 = $300,000. Since Dodd acquired 75% of the common stock of Wallace Corp., the goodwill attributed to Dodd is 75% x $300,000 = $225,000.

Dodd Co Acquired 75% of the Common Stock of Wallace Corp