Kafka Ltd Purchased 80% of Littman Ltd

question 30

Multiple Choice

Kafka Ltd. purchased 80% of Littman Ltd. for $700,000. At the time of acquisition, the carrying value of Littman's net identifiable assets was $1,000,000 and the fair value was $1,350,000. The companies pay tax at the rate of 30%. What is the amount of the goodwill under the partial goodwill method?

• A)$180,000
• B)$(56,000)
• C)$144,000
• D)None of the above.

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Definitions:

Scarce Resources

Essential inputs such as labor, capital, and natural resources that are limited in supply and are allocated for various uses in production.

Vertical Differentiation

A market condition where products are differentiated based on quality, with consumers willing to pay more for higher-quality items.

Welfare Increase

Welfare increase refers to an improvement in the overall well-being and economic status of individuals or communities, often measured by factors such as income, employment, and access to services.

Vertical Differentiation

A marketing strategy where a product is designed to be of higher quality or to have more features than competing products.