Question

On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,000,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:

Book Value FairValue
Current assets $ 6,000,000 $7,500,000
Property, plant, and equipment 11,000,000 14,000,000
Other assets 1,000,000 1,500,000
Current liabilities 4,000,000 4,000,000
Long-term liabilities 6,000,000 5,500,000
Required:
Calculate the amount paid for goodwill.

Answer 1

the amount paid for goodwill is $3,500,000

Step-by-step explanation:

The computation of the amount paid for goodwill is given below

But before that the net fair value of assets would be determined

Net fair value of assets purchased is

= ($7,500,000 + $14,000,000 + $1,500,000) - ($4,000,000 + $5,500,000)

= $13,500,000

Now Amount paid for goodwill is

= $17,000,000 - $13,500,000

= $3,500,000

Hence the amount paid for goodwill is $3,500,000