文档介绍：Advanced Accounting Chapter 5:Allocation, depreciation, and Amortization of the Difference between Cost and Book Value924
Advanced Accounting
by Debra Jeter and Paul Chaney
Chapter 5:
Allocation, depreciation, and Amortization of the Difference between Cost and Book Value
Allocation of Purchase Differential
Book value of
net assets
acquired
Purchase
differential
Acquisition
cost
( MV-BV ) of
identifiable
net assets
Goodwill
(if amount >0)
or bargain purchase (if amount <0)
Allocation of Purchase Differential:
An Alternative 5>View
Book value of
net assets
acquired
Acquisition
cost
( MV-BV ) of
identifiable
net assets
Goodwill
(if amount >0)
or bargain purchase (if amount <0)
Market value of
net assets
acquired
Goodwill
(if amount >0)
or bargain purchase (if amount <0)
Bargain Purchase
Valuation Assets Acquired:
Current assets, long-term investments in marketable securities, liabilities = fair value
Previously recorded goodwill = 0
Long-term assets = fair value - bargain allocation
(The bargain is allocated to long-term assets in proportion to their fair value3>.)
Any remaining bargain is recorded as negative goodwill and amortized over a maximum of 40 years.
Case 1: Positive Goodwill
Wholly Owned Subsidiary
Book value of
net assets
acquired
$2,000,000
Purchase
differential
$750,000
Acquisition
cost
$2,750,000
Goodwill
$250,000
Inventory $50,000
Equipment $300,000
Land $150,000
Case 1: Positive Goodwill
80% Owned Subsidiary
Book value of
net assets
acquired
$1,600,000
Purchase
differential
$600,000
Acquisition
cost
$2,200,000
Goodwill
$200,000
Inventory $40,000
Equipment $240,000
Land $120,000
Note: assets are written up only by :
P% x (MV-BV)
Case 1: Positive Goodwill - EE’s
Retained earnings - S 400,000
Capital stock - S 1,200,000
Difference between cost and book value 600,000
Investment in S 2,200,000
The Investment E