Madison Inc.acquires 100% of the voting stock of Allison Corp.for $10.0 million.Allison's total assets at fair value equaled $12.5 million and Allison had liabilities at fair value equal to $3.4 million.Madison will report goodwill of $0.9 million.

Question

Quizplus · Accepted Answer

Goodwill is calculated as the difference between the purchase price and the fair value of the net assets acquired. In this case, Madison paid $10.0 million for Allison Corp., and the fair value of the net assets acquired is ($12.5 million - $3.4 million) = $9.1 million. Therefore, the goodwill is $10.0 million - $9.1 million = $0.9 million, as stated in the question.