Calculate the amount of goodwill arising from transaction

Reference no: EM132787722

Goodwill Intangible Assets

On January 1, 2020, PT Setia purchased the net assets of PT Romansa, which will become a division of PT Setia. As of December 31, 2019, PT Romansa's book shows the following balances:

Item, Balance

Cash 125,000,

Accounts Payable 150,000,

Accounts Receivable 100,000,

Bank Payable 850,000,

Investment in shares 200,000,

Inventories 1,000,000,

Patents 500,000,

Fixed Assets 3,000,000

PT Setia hires a Indah Public Appraisal Service Office on time to calculate the fair value of PT Romansa. The appraiser's report shows that 10% of accounts receivable are uncollectible, the value of stock investment has increased by 25%, inventories are subject to obsolescence by 10%, while the company's fixed assets are understated by 200,000.

Instructions:

Problem a. Calculate the amount of goodwill arising from the above transaction and make a journal on the transaction, if the purchase price is:

i. IDR 3,850,000; or ii. IDR 3,500,000!

Problem b. The company estimates that the economic life of goodwill is 20 years. Keep the necessary journals regarding this information!

Problem c. As of December 31, 2020, the balance of the Romance Division's net assets (including goodwill) was IDR 3,500,000. The Company estimates that the present value of the Romance Division's net cash flows is IDR 3,350,000, while the fair value less selling costs is IDR 3,250,000. Keep a journal that needs to be made regarding the situation!

Problem d. As of December 31, 2021, the carrying amount of the Romance Division is IDR 2,900,000. Make entries that need to be made if the division's recoverable amount is: (Hint: carrying amount of Inventories is 200,000, Fixed Assets is 500,000, and 400,000 patents)

i. IDR 2,800,000; or

ii. IDR 3,000,000!

Reference no: EM132787722

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