Question 1

Alpha Corp. acquires 100% of Beta Inc. for $1,200,000 in cash. At the acquisition date, Beta's net identifiable assets have a book value of $800,000 and a fair value of $1,050,000. Beta has an unrecorded patent with a fair value of $50,000. What amount of Goodwill should Alpha record?

Accepted Answer

Formula: Goodwill = Consideration Transferred - Fair Value of Identifiable Net Assets. Ensure all identifiable assets (including previously unrecorded ones like patents) are included in the Net Assets FV.

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Forgetting to add unrecorded intangibles to the net asset fair value; using book value instead of fair value.

Alpha Corp. acquires 100% of Beta Inc. for $1,200,000 in cash. At the acquisition date, Beta's net identifiable assets have a book value of $800,000 and a fair value of $1,050,000. Beta has an unrecorded patent with a fair value of $50,000. What amount of Goodwill should Alpha record?

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