Question

On January 1, 2014, Red Company purchased Patriot Shop for $400,000 cash in a merger transaction. Red Company received the assets listed below and assumed accounts payable owed by Patriot to its suppliers in the amount of $30,000. What amount of goodwill will be recorded in the transaction

Answer 1

The value of the assets is missing, so I looked for similar questions and found the attached image.

Goodwill = total consideration paid - fair market value of net assets

• total consideration = $400,000
• fair market value of net assets = inventory + furniture + other assets - accounts payable = $280,000 + $73,000 + $32,000 - $30,000 = $355,000

Goodwill = $400,000 - $355,000 = $45,000