Turner Company's 12/31/08 balance sheet reports assets of $6,000,000 and liabilities of $2,500,000.All of Turner's assets' book values approximate their fair value, except for land, which has a fair value that is $400,000 greater than its book value.On 12/31/08, Benedict Corporation paid $6,100,000 to acquire Turner.What amount of goodwill should Benedict record as a result of this purchase?
A)$ -0-
B)$ 100,000
C)$2,200,000
D)$2,600,000

Question

Quizplus · Accepted Answer

The purchase price of $6,100,000 is greater than the total book value of the assets ($6,000,000) and liabilities ($2,500,000), resulting in $3,600,000 of excess value. The increase in the fair value of the land, which was the only asset whose fair value differed from its book value, accounted for $400,000 of the excess value. Therefore, the remaining $3,200,000 ($3,600,000 - $400,000) should be recorded as goodwill.

Turner Company's 12/31/08 Balance Sheet Reports Assets of $6,000,000 and Liabilities