Question

The balance sheet of Flo's Restaurant showed total assets of $320,000, liabilities of $88,000 and stockholders’ equity of $282,000. An appraiser estimated the fair value of the restaurant assets at $365,000. If Alice Company pays $425,000 cash for the restaurant, what is the amount of goodwill? Multiple Choice $105,000 $148,000 $143,000 $60,000

Answer 1

The answer is $148,000

Step-by-step explanation:

Goodwill comes into effect or arises when a company acquires another company. Goodwill is an intangible asset. It is difference between the purchase price of a company and the net asset(total assets minus total liability)

Purchase price is $425,000

Fair value of the asset is $365,000

Total liability is $88,000.

Net asset = $365,000 - $88,000

=$277,000

Therefore, goodwill is $425,000 - $277,000

= $148,000