Question

The Piazza Baseball Bat Company acquired all of the outstanding common stock of Dierdorf Lumber for $3,500,000. The book values and fair values of Dierdorf's assets and liabilities on the date of purchase were as follows:

Book Value
Fair Value
Current assets
$ 860,000
$ 830,000
Property, plant, and equipment
2,300,000
2,940,000
Liabilities
600,000
600,000
Piazza should record goodwill of:_______.

Answer 1

$330,000

Step-by-step explanation:

Goodwill in business acquisition is defined as the excess of the acqusition price over the fair value of the net identifiable assets of the acquired company.

Workings

Purchase price = $3,500,000

Fair value of current asset = $830,000

Fair value of PPE = $2,940,000

Fair value of liabilities = $600,000

Fair value of net identifiable asset = (830,000+2,940,000-600000)

$3,170,000

Good will = 3,500,000 - 3,170,000=$330,000