Question

Brad corporation acquired lail inc. as part of the acquisition, brad records goodwill of $4,000,000. brad estimates that this goodwill can be attributed to acquisition of trained employees ($800,000), loyal customers ($1,200,000), company location ($500,000), and synergies with brad's existing operations ($1,500,000). brad expects these benefits to be realized over the next 10 years. at the end of the first year, management calculates amortization of the goodwill to be $400,000 ($4,000,000 / 10 years). which of the following statements is correct?

A. Trained employees - $800,000
B. Loyal customers - $1,200,000
C. Company location - $500,000
D. Synergies with Brad's existing operations - $1,500,000

Answer 1

The correct statement is that the amortization of goodwill after the first year will be $400,000.

Step-by-step explanation:

The correct statement is that the amortization of goodwill after the first year will be $400,000.

Goodwill is an intangible asset that represents the value of a company's reputation, customer relationships, and other factors that contribute to its success. In this case, Brad Corporation attributes the goodwill to various factors including trained employees, loyal customers, company location, and synergies with their existing operations.

Goodwill is typically amortized over its estimated useful life, in this case, 10 years. The annual amortization expense is calculated by dividing the goodwill amount by the estimated useful life. Therefore, in the first year, the amortization expense would be $400,000 ($4,000,000 / 10 years). This means that at the end of the first year, $400,000 of the goodwill will be expensed on Brad Corporation's financial statements.