Question

Simmons Corporation paid $170,000 to acquire all of Bush Company's net assets. Bush reported assets with a book value of $189,000 and a fair value of $206,000 and liabilities with a book value and fair value of $48,000 on the date of the combination. Simmons also paid $8,000 to a search firm for finder's fees related to the acquisition. What amount will be recorded as goodwill by Simmons Corporation when recording its investment in Bush

Answer 1

$12,000

Step-by-step explanation:

As per the given question the solution of goodwill that will be reported is provided below:-

Goodwill that will be reported = Paid amount - (Fair value of assets - Fair value of liabilities)

= $170,000 - ($206,000 - $48,000)

= $170,000 - $158,000

= $12,000

Therefore to reach the goodwill that will be reported we applied the above formula, and we have to not considered the book value as they are not related to the goodwill amount because goodwill is recorded at fair value.