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On January 1, 2011, Global Inc.acquired 100% of National Co.'s voting shares for $900,000.The fair market value of National's net assets was $825,000 which equaled their book value.During 2011, National earned $275,000 and paid out cash dividends of $125,000.Goodwill resulting from the acquisition was reviewed by management who determined that no impairment in value had occurred.Global earned net income, excluding National, of $1,200,000 and paid dividends of $200,000.
-The consolidated goodwill reflected on the balance sheet at December 31, 2011 was:

Question

Use the following information for questions 
On January 1, 2011, Global Inc.acquired 100% of National Co.'s voting shares for $900,000.The fair market value of National's net assets was $825,000 which equaled their book value.During 2011, National earned $275,000 and paid out cash dividends of $125,000.Goodwill resulting from the acquisition was reviewed by management who determined that no impairment in value had occurred.Global earned net income, excluding National, of $1,200,000 and paid dividends of $200,000.
-The consolidated goodwill reflected on the balance sheet at December 31, 2011 was:

Quizplus · Accepted Answer

The calculation for consolidated goodwill is: 
Purchase price - fair market value of net assets acquired = goodwill 
$900,000 - $825,000 = $75,000. Since management determined there was no impairment in value, the goodwill remains at $75,000.

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