Midpark Co. purchased a 30% interest in Cycling Pros, Inc. on December 31, 2020 for $1,000,000. On that date, Cycling Pros' net assets had a book value of $2,000,000 and fair value of $3,000,000.

Question

Business

Kian Gates

28 February, 22:36

Midpark Co. purchased a 30% interest in Cycling Pros, Inc. on December 31, 2020 for $1,000,000. On that date, Cycling Pros' net assets had a book value of $2,000,000 and fair value of $3,000,000.

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Shayna Villegas · Answer 1

the total goodwill resulting from this operation = $1,333,333

Explanation:

Since Midpark paid $1,000,000 for 30% of Cycling Pros, that would mean that Midpark determined that the total value of Cycling was: $1,000,000 / 30% = $3,333,333

If the book value of Cycling was $2 million, then the total goodwill resulting from this operation = $3,333,333 - $2,000,000 = $1,333,333