On January 1, 20X4, Shelley Company paid $650,000 cash for 100% of the outstanding common stock of SCD Company; SCD's stockholders equity on the date of acquisition was $500,000. The current market value of SCD's plant and equipment was $100,000 in excess of the equipment's book value. If the market value and book value are the same for SCD's remaining assets, what was the amount of goodwill purchased by Shelley Company?

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Calculation: Goodwill ($50,000) = Amount paid ($650,000) - Fair value of acquired net assets [Stockholders' equity ($500,000) + Plant and equipment differential ($100,000)].

On January 1, 20X4, Shelley Company Paid $650,000 Cash for 100