Question

On September 1, 2020, Flounder Corporation acquired Shamrock Enterprises for a cash payment of $690,000. At the time of purchase, Shamrock’s balance sheet showed assets of $650,000, liabilities of $190,000, and owners’ equity of $460,000. The fair value of Shamrock’s assets is estimated to be $770,000.Compute the amount of goodwill acquired by Flounder.

Answer 1

$110,000

Step-by-step explanation:

Net value of assets = Fair value of assets - Fair value of liabilities

= $770,000 - $190,000

= $580,000

Fair value of goodwill:

= Purchase price - Net value of assets

= $690,000 - $580,000

= $110,000

Therefore, the amount of goodwill acquired by Flounder is $110,000.