Tarkington Beers,Inc.purchased the most popular and well-known pub in a college town.Its purchase price was $1,200,000.The appraisers determined that the land should be valued at $400,000,the building at $500,000,and the equipment at $200,000.Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Tarkington Beers, Inc. should allocate the purchase price of $1,200,000 to the appraised values of the assets (land, building, equipment) totaling $1,100,000. The excess of the purchase price over the fair value of the net assets acquired ($1,200,000 - $1,100,000) is recorded as goodwill, which is $100,000.