Stockit, Inc. issued 100,000 shares of the 1,000,000 shares it is allowed to issue. Stockit has repurchased 10,000 of its own sh
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Answer:
Value of goodwill = $350,000
Explanation:
In case where is investment in 100% shares of a company then that may give rise to goodwill or rise to capital reserve.
Any amount paid to acquire that interest in company more than the value of such company is recorded as goodwill.
Here, cost of acquisition = $15 250,000 = $3,750,000
Carrying value of net assets of the company = $3,000,000
Increase in value due to fair value = $400,000
Value of goodwill = Purchase price - Fair Value of net assets
Therefore, value of goodwill = $3,750,000 - ($3,000,000 + $400,000) = $350,000