Big Bertha's Birds purchased Finkel's Finches for $100,000 and the book value was $50,000. If Big Bertha's amortized the goodwill off its balance sheet for the maximum time period allowed, what would the annual charge against earnings be?

Question

Quizplus · Accepted Answer

$1,250 would be amortized annually off the balance sheet for the maximum time period allowed, which is 40 years. The Goodwill was $50,000 ($100,000 ? $50,000) divided by 40 = $1,250.
Key Takeaway: The maximum time period allowed for amortization is 40 years. The goodwill total is divided by the number of years for amortization to produce the annual charge against earnings.

Big Bertha's Birds Purchased Finkel's Finches for $100,000 and the Book