Routing Solutions paid $210,000 to acquire Tabletz, Inc., an electronic gadget-advertising website. At the time of the acquisition, Tabletz's balance sheet reported total assets of $210,000 and liabilities of $105,000. The fair market value of Tabletz's assets was $210,000. The fair market value of its liabilities was $105,000. How much goodwill did Routing Solutions purchase as part of the acquisition of Tabletz?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the purchase price of a company minus the fair market value of its net assets (assets minus liabilities). In this case, Routing Solutions paid $210,000 for Tabletz, whose net assets (assets of $210,000 minus liabilities of $105,000) have a fair market value of $105,000. Therefore, the goodwill purchased is $210,000 (purchase price) - $105,000 (fair market value of net assets) = $105,000.

Routing Solutions Paid $210,000 to Acquire Tabletz, Inc