Samper Company reported the book value of its net assets at $160,000 when Public Corporation acquired 100 percent of its voting stock for cash. The fair value of Samper’s net assets was determined to be $190,000 on that date.

Samper Company reported the book value of its net assets at $160,000 when Public Corporation acquired 100 percent of its voting stock for cash. The fair value of Samper’s net assets was determined to be $190,000 on that date.

Required:
Determine the amount of goodwill to be reported in consolidated financial statements presented immediately following the combination and the amount at which Public will record its investment in Samper if the amount paid by Public is

$310,000.
$196,000.
$150,000. 

Explanation
Goodwill: $120,000 = $310,000 − $190,000

Investment: $310,000

Goodwill: $6,000 = $196,000 − $190,000

Investment: $196,000

Goodwill: $0; no goodwill is recorded when the purchase price is below the fair value of the net identifiable assets.

Investment: $190,000; recorded at the fair value of the net identifiable assets.

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