Question & Answer: On June 1, Cline Co. paid $1,012,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for…..

On June 1, Cline Co. paid $1,012,000 cash for all of the issued and outstanding common stock of Renn Corp. The carrying amounts for Renn’s assets and liabilities on June 1 follow:

Cash $ 197,000
Accounts receivable 247,000
Capitalized software costs 391,000
Goodwill 135,000
Liabilities (228,000 )
Net assets $ 742,000

On June 1, Renn’s accounts receivable had a fair value of $202,000. Additionally, Renn’s in-process research and development was estimated to have a fair value of $290,000. All other items were stated at their fair values. On Cline’s June 1 consolidated balance sheet, how much is reported for goodwill?

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Expert Answer

 

Cash paid = $1,012,000

Less:- fair value of the net assets :-

Cash 197000 + AR 202000 + Cap. Software costs 391000 + research and development costs 290000 – Liabilities 228000 = $ 852000

= Goodwill $ 160000

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