Plummet Corporation Reported the Book Value of Its Net Assets

question 38

Multiple Choice

Plummet Corporation reported the book value of its net assets at $400,000 when Zenith Corporation acquired 100 percent ownership.The fair value of Plummet's net assets was determined to be $510,000 on that date.
-Based on the preceding information,what amount of goodwill will be reported in consolidated financial statements presented immediately following the combination if Zenith paid $550,000 for the acquisition?

• A)$0
• B)$50,000
• C)$150,000
• D)$40,000

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Definitions:

Average Collection Period

The average number of days it takes for a business to receive payments owed by its customers for sales made on credit.

Receivables Turnover Ratio

The Receivables Turnover Ratio measures how effectively a company collects its outstanding credit, calculated by dividing net credit sales by the average accounts receivable.

Notes Receivable

Financial assets representing amounts owed to a company, payable within a certain period.

Dishonoured

Pertains to a financial instrument, like a check or promissory note, that is not paid upon presentation due to insufficient funds or any other reason for non-payment.