Firm a Acquires Firm B When Firm B Has a Book

question 68

Multiple Choice

Firm A acquires firm B when firm B has a book value of assets of $155 million and a book value of liabilities of $35 million. Firm A actually pays $175 million for firm B. This purchase would result in goodwill for firm A equal to ________.

• A) $175 million
• B) $155 million
• C) $120 million
• D) $55 million

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Definitions:

Compounded Quarterly

Interest calculation method where interest is added to the principal sum four times a year.

Poultry Company

A business enterprise that specializes in the production, processing, and distribution of chickens and other poultry for consumption.

Necessary Improvements

Upgrades or repairs required on a property or equipment to make it functional, efficient, or compliant with regulations.

Compounded Quarterly

A method of calculating interest where the interest earned is added to the principal amount at the end of each quarter, leading to interest on interest in subsequent periods.