Goodwill is calculated as the excess of:
A) a target firm's purchase price over the FMV of its equity.
B) a target firm's book value of assets over the book value of debt.
C) the FMV of a target firm's equity over its purchase price.
D) the FMV of the acquiring firm's equity over the FMV of the target firm's equity.

Question

Quizplus · Accepted Answer

Goodwill is the excess of the purchase price over the fair market value (FMV) of the target firm's assets and liabilities. It represents the difference between the price paid for the company and the value of the company's net assets. Therefore, option A is the correct choice as it mentions the excess of the purchase price over the FMV of the equity.

Goodwill Is Calculated as the Excess Of