What is the total increase in assets on the consolidated balance sheet after the acquisition, including the goodwill?

What is the total increase in assets on the consolidated balance sheet after the acquisition, including the goodwill?

• A. 1000
• B. 1300
• C. 800
• D. 200

Answer: (B)

In a business combination, the assets and liabilities of the acquired company are brought onto the consolidated balance sheet at their fair values. Any excess of the purchase price over the fair value of the net identifiable assets is recorded as goodwill, which is itself an asset. So the total increase in assets on the consolidated balance sheet equals the fair value of the identifiable assets acquired plus the goodwill recognized. For example, if the identifiable assets are valued at 1000 and the goodwill recognized is 300, the total increase in assets would be 1300. This matches the result given.

In a business combination, the assets and liabilities of the acquired company are brought onto the consolidated balance sheet at their fair values. Any excess of the purchase price over the fair value of the net identifiable assets is recorded as goodwill, which is itself an asset. So the total increase in assets on the consolidated balance sheet equals the fair value of the identifiable assets acquired plus the goodwill recognized. For example, if the identifiable assets are valued at 1000 and the goodwill recognized is 300, the total increase in assets would be 1300. This matches the result given.