Question

Pro-tech Software acquired all of the outstanding stock of Reliable Software for $17 million. The book value of Reliable’s net assets (assets minus liabilities) was $8.6 million. The fair values of Reliable’s assets and liabilities equaled their book values with the exception of certain intangible assets whose fair values exceeded book values by $2.8 million.

1. Calculate the amount paid for goodwill. (Enter your answer in whole dollars.)

Answer 1

$5,600,000

Step-by-step explanation:

For computing the cost of the goodwill, first, we have to calculate the fair value of the net asset which is shown below:

The fair value of net asset = The book value of Reliable’s net assets + exceeded book values amount

= $8,600,000+ $2,800,000

= $11,400,000

And, the acquired all of the outstanding stock is $17 million

So, the goodwill would be

= $17,000,000 - $11,400,000

= $5,600,000