Question

Robinson Company purchased Franklin Company at a price of $3,830,000. The fair market value of the net assets purchased equals $2,790,000. 1. What is the amount of goodwill that Robinson records at the purchase date? 2. Does Robinson amortize goodwill at year-end? 3. Robinson believes that its employees provide superior customer service, and through their efforts, Robinson believes it has created $1,420,000 of goodwill. Should Robinson Company record this goodwill?

Answer 1

Goodwill 1,040,000

2.- It will need to be amortized at year-end

3.- Goodwill can only be created through third parties operations, Robinson cannot increase his own goodwill. A third party must be willing to pay that amount

Step-by-step explanation:

3,830,000 - 2,790,000 = difference 1,040,000