Find how much is the goodwill on the business combination

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Reference no: EM132726277

On January 1, 20x1, KNAVE acquired 80% of the equity interests of RASCAL, Inc. in exchange for cash. Because the former owners of RASCAL needed to dispose of their investments in RASCAL by a specified date, they did not have sufficient time to market RASCAL to multiple potential buyers. As January 1, 20x1, RASCAL's identifiable assets and liabilities have fair values of ?2,400,000 and ?800,000, respectively.

Problem 1: KNAVE Co. elects the option to measure non-controlling interest at fair value. An independent consultant was engaged who determined that the fair value of the 20% non-controlling interest in RASCAL, Inc. is ?310,000. If KNAVE Co. paid ?2,000,000 cash as consideration for the 80% interest in RASCAL, Inc., how much is the goodwill (gain on bargain purchase) on the business combination?

Reference no: EM132726277

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