On January 1, 2014, Fall Corporation Acquired 100% of the Outstanding

question 77

Essay

On January 1, 2014, Fall Corporation acquired 100% of the outstanding voting shares of Foliage Corporation for $600,000. The book and fair values of Foliage's assets and liabilities as of January 1, 2014 are listed below: $$\begin{array} { l r r } \text { Item } & \text { Book Value } & \text { Fair value } \\\text { Equipment } & \$ 60,000 & \$ 80,000 \\\text { Trucks } & \$ 40,000 & \$ 55,000 \\\text { Factory } & \$ 300,000 & \$ 320,000 \\\text { Other assets } & \$ 130,000 & \$ 100,000 \\\text { Liabilities } & \$ 100,000 & \$ 105,000\end{array}$$ Required:
Calculate the amount of goodwill resulting from the acquisition.

---

Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and implicit costs.

Perfectly Competitive Firm

A company that operates in a market where there are many buyers and sellers, no barriers to entry or exit, and the firm sells a homogeneous product.

MR

The extra revenue that a firm gains when it sells an additional unit of output, essentially another term for marginal revenue.

AVC

Average Variable Cost, the total variable costs divided by the quantity of output produced.