On January 1, 20X5, Seaside Company acquires 90 percent ownership in Rainbow Cor
ID: 2451411 • Letter: O
Question
On January 1, 20X5, Seaside Company acquires 90 percent ownership in Rainbow Corporation for $180,000. The fair value of the noncontrolling interest at that time is determined to be $20,000. Rainbow reports net assets with a book value of $160,000 and fair value of $175,000. Seaside Company reports net assets with a book value of $480,000 and a fair value of $525,000 at that time, excluding its investment in Rainbow. What will be the amount of goodwill that would be reported immediately after the combination?
A. $5,000
B. $20,000
C. $25,000
D/ $40,000
Explanation / Answer
Fair Value of Net asset of Rainbow = $ 175000
Total Consideration of 90% Ownership = 180000
Fair value of the noncontrolling interest = $ 20000
Good Will = (180000+20000)-175000
Good Will = $ 25000
Answer
C. $25,000