Jones Company acquired Jackson Company for $2,000,000 cash.At that time, the fair value of recorded assets and liabilities was $1,500,000 and $250,000, respectively.Jackson also had unrecorded copyrights valued at $150,000 and its direct costs related to the acquisition were $50,000.What was the amount of the goodwill related to the acquisition?

Question

Jones Company acquired Jackson Company for $2,000,000 cash.At that time, the fair value of recorded assets and liabilities was $1,500,000 and $250,000, respectively.Jackson also had unrecorded copyrights valued at $150,000 and its direct costs related to the acquisition were $50,000.What was the amount of the goodwill related to the acquisition?​

Quizplus · Accepted Answer

Goodwill = Purchase price - (Fair value of assets acquired - Fair value of liabilities assumed + Fair value of unrecorded intangible assets) = $2,000,000 - ($1,500,000 - $250,000 + $150,000) = $2,000,000 - $1,400,000 = $600,000. Acquisition-related costs are not considered in the calculation of goodwill.

Jones Company Acquired Jackson Company for $2,000,000 Cash