Question

Firm A acquires firm B when firm B has a book value of assets of $255 million and a book value of liabilities of $85 million. Firm A actually pays $275 million for firm B. This purchase would result in goodwill for firm A equal to _____.

Answer 1

$105 million

Step-by-step explanation:

The computation of the goodwill for the Firm A is shown below;

Goodwill = Acquiring Price - (Assets - Liabilities)

= $275 million - ($255 million - $85 million)

= $275 million - $170 million

= $105 million

Hence, the goodwill for the Firm A is $105 million

We simply applied the above formula and the same is to be considered