On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,500,000 in cash. The book values and fair values of Barney's assets and liabilities were as follows: Book Value Fair Value Current assets $ 6,500,000 $ 8,000,000 Property, plant, and equipment 11,500,000 14,500,000 Other assets 1,050,000 1,550,000 Current liabilities 4,500,000 4,500,000 Long-term liabilities 6,500,000 6,000,000

Amount paid for goodwill = $3950000

Explanation:

given data

outstanding common stock = $17,500,000

book values fair values

Current assets $6,500,000 $8,000,000

Property plant and equipment 11,500,000 14,500,000

Other assets 1,050,000 1,550,000

Current liabilities 4,500,000 4,500,000

Long-term liabilities 6,500,000 6,000,000

to find out

Calculate the amount paid for goodwill

solution

we get here first Net fair value of assets acquired that is here

Net fair value of assets = Current assets + Property plant and equipment + Other assets - Current liabilities - Long-term liabilities ... 1

put here value we get

Net fair value of assets = 8,000,000 + 14,500,000 + 1,550,000 - 4,500,000 - 6,000,000

Net fair value of assets = 13550000

and

Amount paid for goodwill here

Amount paid for goodwill = outstanding common stock - Net fair value of assets ... 2

put here value

Amount paid for goodwill = $17,500,000 - 13550000

Amount paid for goodwill = $3950000