Azimuth Company purchases a small business for $500 000. The market value of the business's assets are $850 000, and the market value of the liabilities are $400 000. How much goodwill should Azimuth record?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the purchase price minus the fair value of net assets (assets minus liabilities). Here, net assets are $850,000 - $400,000 = $450,000. Goodwill is $500,000 - $450,000 = $50,000.

Azimuth Company Purchases a Small Business for $500 000