On September 1,20X7,Spike Limited Decided to Buy 100% of the Outstanding

question 4

Essay

On September 1,20X7,Spike Limited decided to buy 100% of the outstanding shares of Volley Inc.for $1,200,000 paid for with the issuance of shares.In addition Spike has agreed to pay an additional $250,000 if the revenues of Volley have a 5% growth over the next two years from the date of the acquisition.It has been determined that the fair value of this contingent consideration is $175,000.
The balances showing on the statement of financial position for the two companies at August 31,20X7 are as follows:

After a review of the financial assets and liabilities,Spike determines that some of the assets of Volley have fair values different from their carrying values.These items are listed below:
Capital assets - fair value is $1,350,000
Patent - fair value is $255,000
Brand name - fair value is $135,000
Required:
Determine the amount of goodwill that will be recorded on the business combination.
Prepare the consolidated statement of financial position as at September 1,20X7.

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