Evenbeck Company purchased Ferguson Company for $500,000 cash. The fair market value of Ferguson's assets was $320,000 and the company had no liabilities. Which of the following choices would reflect the purchase on Evenbeck's financial statements?

Question

Quizplus · Accepted Answer

The purchase price of $500,000 exceeds the fair market value of the assets acquired ($320,000), resulting in a goodwill of $180,000 ($500,000 - $320,000 = $180,000). Therefore, the entry to record the purchase would be to debit "Goodwill" for $180,000 and credit "Cash" for $500,000. There would be no other entries required. This is reflected in Choice D.

Evenbeck Company Purchased Ferguson Company for $500,000 Cash