In 2017, First Company purchased Second Company for $19,000,000 cash. At the time of purchase, Second Company's assets had a market value of $25,000,000 and the liabilities had a market value of $18,000,000. At the time of purchase, Second Company's assets had a book value of $15,000,000 and the liabilities had a book value of $10,000,000. What amount of goodwill is recorded?

Question

Quizplus · Accepted Answer

Goodwill = Purchase price - (Fair value of assets - Fair value of liabilities)= 19,000,000 - (25,000,000 - 18,000,000)= 19,000,000 - 7,000,000= 12,000,000

In 2017, First Company Purchased Second Company for $19,000,000 Cash