Question

Kasper Corporation acquired all outstanding shares of Paddy Ltd. for $4.2 million. Selected information relating to Paddy was as follows:

Fair value of identifiable net assets:
$4.0 million
Book value of identifiable net assets:
$3.1 million
Cash balance:
$0.1 million

Kasper will recognize goodwill of:_________

a) $1.1 million
b) $0.2 million
c) $4.1 million
d) $3.0 million

Answer 1

Kasper Corporation's acquisition of Paddy Ltd. results in recognizing goodwill of $0.2 million, which is the excess of the purchase consideration ($4.2 million) over the fair value of identifiable net assets ($4.0 million).

Step-by-step explanation:

Kasper Corporation acquired Paddy Ltd. and the calculation for goodwill in a business combination involves assessing the excess of the purchase consideration over the fair value of the identifiable net assets. In this case, Kasper Corporation paid $4.2 million for Paddy Ltd. whose identifiable net assets have a fair value of $4.0 million. The goodwill recognized would be the difference between these two amounts.

Goodwill = Purchase Consideration - Fair Value of Identifiable Net Assets

Goodwill = $4.2 million - $4.0 million

Goodwill = $0.2 million

Thus, the correct answer is b) $0.2 million.