X Company acquires all of Y Company's assets and liabilities for $15,000,000 in cash. The...
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X Company acquires all of Y Company's assets and liabilities for $15,000,000 in cash. The fair values of Y's assets and liabilities approximate their book values, except Y has developed technology valued at $8,000,000 that is not reported on its balance sheet, and its buildings are overvalued by $7,000,000. Here is Y's balance sheet just prior to the acquisition:
|
| Y Company |
| Current assets | $ 500,000 |
| Land, buildings, and equipment | 9,500,000 |
| Total assets | $10,000,000 |
|
|
|
| Liabilities | $ 6,000,000 |
| Common stock, $1 par | 100,000 |
| Additional paid-in capital | 2,915,000 |
| Retained earnings | 1,000,000 |
| Treasury stock | (20,000) |
| Accumulated other comprehensive income | 5,000 |
| Total liabilities and equity | $10,000,000 |
How much goodwill is recognized for this acquisition?
A. $12,000,000
B. $ 4,000,000
C. $10,000,000
D. $16,000,000
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