Answered Essay: Immediately following an acquisition, the alpha company's (the parent company# balance sheet included cash $50,

Immediately following an acquisition, the alpha company’s (the parent company# balance sheet included cash $50,000, investment in subsidiary $200,000, plant assets $450,000, and liabilities of $150,000. Bravo-Zulu Company, #The wholly owned subsidiary) had cash $75,000, plant assets $145,000, and liabilities $60,000. All balance are normal. There are no other assets of liabilities, and the given values for the subsidiary are also equal to their fair values. Use the information to determine the dollar value of Alpha Company’s 1. Goodwill 2. Total Assets before Consolidation 3. Total Liabilities after Consolidation 4. total Assets after Consolidation

Expert Answer

 

1. Goodwill = Investment in subsidiary(Bravo-Zulu Company) – Net assets of Bravo-Zulu Company

= $200,000 – $160000

= $40000

Note:- Net Assets of Bravo-Zulu Company = cash + plant assets – liabilities

=$75,000 + 145000 – $60,000

= $160000

2. Total Assets before Consolidation = cash + plant assets + investment in subsidiary + goodwill

= $50000 + $450000 + $200000 + $40000

=$740000

3. Total Liabilities after Consolidation = Total liabilities after acquisition

=150000 + 60000

= $210000

4. total Assets after Consolidation = Total cash after acquisiton + Total plant assets after acquisition + Goodwill

=[50000 + 75000] + [450000 + 145000] + 40000

=125000 + 595000 + 40000

= $760000

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