Question

The balance sheet of Cattleman's Steakhouse shows assets of $86,000 and liabilities of $14,400. The fair value of the assets is $89,400 and the fair value of its liabilities is $14,400. Longhorn paid Cattleman's $82,920 to acquire all of its assets and liabilities. Longhorn should record goodwill on this purchase of:

Answer 1

The goodwill is $7,320

Step-by-step explanation:

It is given that fair value of assets is $89,400 and fair value of liabilities is $14,400

Fair value difference = Fair value of assets - Fair value of liabilities

Fair value difference = $89,400 - $14,400

Fair value difference = $75,000

Hence, the fair value difference is $75,000

It is given that acquisition price is $82,920 and calculated fair value difference is $75,600. Calculation of goodwill is given below

Goodwill = Acquisition price - Fair value difference

Goodwill = $82,920 - $75,600

Goodwill = $7,320

Hence, the goodwill is $7,320.