As it applies to an acquisition,the term goodwill is defined as the difference between the
A)purchase price and the book value of the target firm.
B)purchase price and the estimated fair market value of the net assets acquired.
C)fair market value of the net assets acquired and the target firm's equity.
D)market value and the book value of the target firm.
E)market value and book value of the target firm's total assets.

Question

Quizplus · Accepted Answer

Goodwill is the amount paid for an acquisition that exceeds the estimated fair market value of the net assets acquired. In other words, it represents the value of the target firm's intangible assets such as brand name, customer relationships, and reputation that are not reflected in the book value of its assets. Therefore, option B is the correct definition of goodwill in the context of an acquisition.

As It Applies to an Acquisition,the Term Goodwill Is Defined