Kenora Inc.paid $10,000,000 to purchase Churchill Corporation.At the time of the purchase, Churchill Corporation had net assets with a book value of $6,500,000 and a market value of $8,200,000.How much is the value of goodwill that Kenora will report on their balance sheet as a result of the purchase?

Question

Quizplus · Accepted Answer

Goodwill is the amount paid for an acquisition above the fair market value of the assets acquired. In this case, the fair market value of Churchill Corporation's net assets was $8,200,000, but Kenora paid $10,000,000. Therefore, the goodwill is $10,000,000 - $8,200,000 = $1,800,000.