Resnick Inc

question 21

Essay

Resnick Inc. acquired 75% shareholding in Canty Ltd. for $20 million. Book value of net identifiable assets of Canty is $14 million. The fair value of Canty's asset is the same as their book value except accounts receivables which are impaired by $1 million. Book value of assets is $54 million while book value of liabilities is $40 million. The tax rate is 30%.
Required:
Calculate goodwill using the partial goodwill method.

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Definitions:

Invisible Hand

A metaphor introduced by Adam Smith to describe the self-regulating nature of the marketplace, where individual self-interests unintentionally benefit society as a whole.

Price Mechanism

The way in which prices rise and fall as a result of changes in demand and supply, guiding the allocation of resources in a market economy.

External Benefit

A benefit from a good or service that is received by someone not directly involved in the transaction or production of that good or service, also known as a positive externality.

Pollution

The introduction of contaminants into the natural environment that cause adverse changes and harm to the ecosystem.