Question

Cullumber Company’s 12/31/21 balance sheet reports assets of $11450000 and liabilities of $4890000. All of Cullumber’s assets’ book values approximate their fair value, except for land, which has a fair value that is $690000 greater than its book value. On 12/31/21, Egbert Corporation paid $11642000 to acquire Cullumber. What amount of goodwill should Egbert record as a result of this purchase?

Answer 1

Answer:

$4,392,000

Explanation:

For computing the cost of the goodwill, first we have to calculate the fair value of the net asset which is shown below:

The fair value of net asset = Asset balance + fair value of land  - liabilities balance

= $11,450,000 + $690,000 - $4,890,000

= $7,250,000

And, the acquire value is $11,642,000

So, the goodwill would be  

= $11,642,000 - $7,250,000

= $4,392,000