Mainline Produce Corporation acquired all the outstanding common stock of Iceberg Lettuce Corporation for $38,000,000 in cash. The book values and fair values of Iceberg’s assets and liabilities were as follows:
Book Value Fair Value
Current assets $ 11,800,000 $ 14,800,000
Property, plant, and equipment 24,000,000 30,000,000
Other assets 2,200,000 3,200,000
Current liabilities 6,600,000 6,600,000
Long-term liabilities 11,400,000 10,400,000
Required:
1. Calculate the amount paid for goodwill.

The Goodwill is $7,000,000

Explanation:

$

Purchase price. 38,000,000

Less:

Fair value of asset 48,000,000

Less: Fair value of liabilities 17,000,000

Fair value of net Asset. 31,000,000

Goodwill. 7,000,000

Workings

Fair value of Asset = Current Asset + Property, plant and equipment + Other asset

= 14,800,000 + 30,000,000 + 3,200,000

= 48,000,000

Fair value of Liabilities = Current Liability + Long term Liability

= 6,600,000 + 10,400,000

= 17,000,000

$7 million

Explanation:

Make Adjustments between the Book Values and the Fair Values

                                             All values are in $Million(s)

                              Book Value      Fair Value         Adjusted

Current Assets         11.8                    14.8                    3

Fixed Assets             24                     30                      6

Other Assets            2.2                     3.2                     1

Current Liabilities    (6.6)                   (6.6)                   (0)

LT Liabilities             (11.4)                  (10.4)                   1

Equity                        20                     31                       11

Now, we would calculate the excess purchase price which is the difference between the $38 million paid by Mainline Produce Corporation in order to acquire Iceberg Lettuce Corporation and the net book value of the assets

Excess purchase price = 38 - 20 = $18 million

Goodwill = Excess purchase price - Fair value adjustments

               = $18 million - $11 million

             = $7 million

The goodwill paid is $7 million

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know

answer; blank(1); /// whitelisting; blank(2); // blacklisting;