Question

On January 4, David Company acquired all of the net assets (assets and liabilities) of William Company for $ 145,000 cash. The two companies merged, with David Company surviving. On the date of acquisition, William's balance sheet included the following.
The property and equipment had a fair value of $ 85,000 . William also owned an internally developed patent with a fair value of $ 3,000 . The book values of the cash and liabilities were equal to their fair values.
Required:
(a) How much goodwill was involved in this merger? Show computational

Answer 1

To calculate goodwill, the truthful cost of the assets and liabilities of the received commercial enterprise is added to the truthful value of the business's belongings and liabilities.

Calculation of goodwill gain and bargain purchase:-

Particulars                                                                            Amount

Assets :                                                                              

         cash                                                                            $ 23,000                            

       property & equipment                                                   85,000

 internally developed patent                                                3,000

     Total assets                                                                     $ 111,00

Less: Liabilities                                                                     ( 16000 )

Net assets of William co.                                                      $ 95,000

Purchase consideration paid                                               $ 145,000

goodwill [ purchase consideration-net assets ]                  $ 50,000

The assets & Liabilities of the Acquiree are recorded at fair value in the books of the acquiree.

The excess of price over the honest cost of internet identifiable assets is called goodwill. Goodwill Calculation example: business enterprise X acquires organization Y for $2 million. whatever it pays above and past the internet fee of the target's identifiable assets turns into goodwill on the balance sheet.

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