Rommer Company purchases Daley Inc. for $970,000 cash on January 1, 2018. The book value of Daley Company's net assets, as reflected on its December 31, 2017 statement of financial position is $730,000. An analysis by Rommer on December 31, 2017 indicates that the fair value of Daley's tangible assets exceeded the book value by $90,000, and the fair value of identifiable intangible assets exceeded book value by $35,000. How much goodwill should be recognized by Rommer Company when recording the purchase of Daley Inc.?

Question

Quizplus · Accepted Answer

The excess of the purchase price over the fair value of identifiable net assets is goodwill. The fair value of identifiable net assets is the sum of the fair value of tangible assets and the fair value of identifiable intangible assets. In this case, the fair value of identifiable net assets is $730,000 + $90,000 + $35,000 = $855,000. The excess of the purchase price over the fair value of identifiable net assets is $970,000 - $855,000 = $115,000.

Rommer Company Purchases Daley Inc