Question

On March 31, 2021, Wolfson Corporation acquired all of the outstanding common stock of Barney Corporation for $17,200,000 in cash. The book values and fair values of Barney’s assets and liabilities were as follows:

Book Value Fair Value
Current assets $6,200,000 $7,700,000
Property, plant, and equipment 11,200,000 14,200,000
Other assets 1,020,000 1,520,000
Current liabilities 4,200,000 4,200,000
Long-term liabilities 6,200,000 5,700,000

Calculate the amount paid for goodwill.

Answer 1

$3,680,000

Step-by-step explanation:

Goodwill is an intangible asset that shows the excess of the purchase consideration less the fair value of the net identifiable assets. It is given as

Goodwill = Purchase Consideration – Fair value of net identifiable assets.

Fair value of net identifiable assets of Barney Corporation

= $7,700,000 + $14,200,000 + $1,520,000 - $4,200,000 - $5,700,000

= $13,520,000

Goodwill = $17,200,000 - $13,520,000

= $3,680,000