A acquires 40% of B for 1,500,000, assume significant influence. PP&E depreciation, over the remaing 10 yrs. assets BV Fair Value CA 200,000 200000 PP&E 2,000,000 2,300,000 Land 1,300,000 1,500,000 liabilities 800,000 800,000 Net assets 2,700,000 3,200,000 Amortization of excess purchase price will be: a.12,000 b.20,000 c.30,000
Purchase price=1500 FV of Sub’s net assets=3200 40% of net assets = .4 * 3200=1280 Excess Purchase Price= 1500-1280 = 220 Amount of FV over BV for PP&E = 2300-2000=300 Amount of Excess Purchase price attributable to Assets = 300*.4 = 120 So Depreciation each year = 120/10 = 12 A) 12000
Good point. It is not 20,000 because land is not amortized, just like goodwill is not amortized.
300K * .4 = 120k 120/10 = 12
cpk123, if you had to find goodwill - would you still use “FV of sub’s net assets” ? or BV as below? Calculation of goodwill : purchase price = 1.5m % of BV of sub = 1.08m attributable to excess ppe and land = 0.12m goodwill = 0.3m suggestions? thoughts?
wouldn’t it depend on if its the partial or full goodwill method? Purchase Price = $1.5 million FV of net assets acquired = 3.2*.4 = $1.28 million Excess to PPE = 300k * .4 = 120k Excess to Land = 200k * .4 = 80k 1.5M - 1.28M - 120k - 80k = 20k goodwill
Full goodwill and partial goodwill are part of the acquisition method. when accounting for investments under the equity method - what should we use FV or BV of sub’s net assets ? the formula i have in my notes is PP - (%)(Book value of net assets) - (%)(difference attributable to FV differing from BV) = goodwill.
theres a question like this in schweser Mock 3, can’t remember if its AM or PM. But i know in that question, they picked up the excess purchase price attributable to PP&E and amortized it.
I’m going with A 300/10 = 30 30*.4 = 12