Question

kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $19.5 million. The fair value of Midwest's assets is $14.6 million. The fair value of Midwest's liabilities is $2.6 million. Calculate the amount paid for goodwill. (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

$7.5 million

Step-by-step explanation:

Fair value of acquired asset = $14.6 million

Fair value of liabilities = $2.6 million

Fair value of net assets = $14.6 million - $2.6 million = $12 million

Purchase price = $19.5 million

Fair value of identifiable asset = $12 million

Amount paid for goodwill = Purchase price - Fair value of identifiable asset

Amount paid for goodwill = $19.5 million - $12 million

Amount paid for goodwill = $7.5 million