Question

Annapolis Company was recently sold for $470,000. Annapolis had assets & liabilities appraised at the time of the sale in the amounts of:ItemAmountAccounts Receivable assumed by buyer $135,000Inventory $275,000Property, Plant & Equipment (net) $500,000Notes Payable assumed by buyer $655,000Using this information, how much should be recorded as Goodwill for this transaction?

Answer 1

Answer:

$215,000

Explanation:

Goodwill is the excess of purchase consideration over the net asset of a company. It is an intangible asset

Good will = Purchase consideration - net asset

Net assets is the difference between the company's assets and its liabilities.

Net asset = $135,000 + $275,000 + $500,000 - $655,000

= $255,000

Goodwill = $470,000 - $255,000

= $215,000

Goodwill for this transaction is $215,000.