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How much is the goodwill

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Question - On January 1, 2021, ABC Co. acquired all of the identifiable assets and assumed all of the liabilities of XYZ, Inc. by paying cash of 4,000,000. On this date, XYZ's identifiable assets and liabilities have fair values of 6,400,000 and 3,600,000, respectively.

ABC agrees to pay an additional amount equal to 10% of the 20x1 year-end profit that exceeds 1,600,000. XYZ historically has reported profits of 1,200,000 to 1,600,000 each year. After assessing the expected level of profits for the year based on forecasts and plans, as well as industry trends, ABC estimated that the fair value of the contingent consideration is 40,000.

Required - How much is the goodwill (gain on bargain purchase)?

Reference no: EM133121831

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