On January 1,2019,Sheldon Company paid $750,000 cash for 100% of the outstanding common stock of Mullen Company;Mullen's book value of assets minus liabilities on the date of acquisition was $550,000.The current fair value of Mullen's net assets was $70,000 in excess of their book value.What was the amount of goodwill acquired by Sheldon Company?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired. In this case, the purchase price is $750,000 and the fair value of net assets is $620,000 ($550,000 book value + $70,000 excess fair value). Therefore, the goodwill acquired is $130,000 ($750,000 - $620,000). Option B is the correct answer.

On January 1,2019,Sheldon Company Paid $750,000 Cash for 100% of the Outstanding