Goodwill is the excess of the purchase price of the acquired enterprise over the
A) fair value of the tangible net assets acquired.
B) book value of the identifiable net assets acquired.
C) book value of the tangible net assets acquired.
D) fair value of the identifiable net assets acquired.

Question

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of the identifiable net assets acquired. This means that any intangible assets, such as brand recognition or intellectual property, are included in the calculation of goodwill. The book value of the tangible net assets acquired may not reflect the true value of the company, as it does not account for any intangible assets. Therefore, the best choice is D.

Goodwill Is the Excess of the Purchase Price of the Acquired