ABC Inc. recently purchased XYZ Inc. XYZ had a total market value of $6.2 million. However, ABC actually paid $6.4 million for the acquisition. This acquisition created an asset called _________ of an amount of $0.2 million.

Question

Quizplus · Accepted Answer

Goodwill is created when the purchase price of an acquisition exceeds the fair market value of the assets and liabilities acquired. In this case, ABC paid $6.4 million for XYZ, which was more than its market value of $6.2 million. Therefore, the $0.2 million difference represents goodwill.

ABC Inc Recently Purchased XYZ Inc