Compute what is amount of goodwill that acme will record

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Reference no: EM132767353

Evaluation of potential acquisition :

Martin & Sons has $4.2 million in net working capital. The firm has total assets with a book value of $48.6 million and a market value of $53.4 million. They currently carry no debt on their balance sheet, sales are expected to be $45 million next year, and their tax rate is similar to ACME at 40%. Through a mixture of synergistic savings and increased market share this acquisition should add $2 million in net profit per year for the next 10 years. Acme Iron is considering buying the company for $60 million in cash. The acquisition will be recorded using the purchase accounting method.

Problem 1: What is the amount of goodwill that Acme will record on its balance sheet as a result of this acquisition?

Reference no: EM132767353

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