Simmons Corporation paid $170,000 to acquire all of Bush Company's net assets.Bush reported assets with a book value of $189,000 and a fair value of $206,000 and liabilities with a book value and fair value of $48,000 on the date of the combination.Simmons also paid $8,000 to a search firm for finder's fees related to the acquisition.What amount will be recorded as goodwill by Simmons Corporation when recording its investment in Bush?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the purchase price minus the fair value of net assets acquired. The fair value of net assets is $206,000 (assets) - $48,000 (liabilities) = $158,000. The purchase price is $170,000. Therefore, goodwill is $170,000 - $158,000 = $12,000. The finder's fees are not included in the goodwill calculation.

Simmons Corporation Paid $170,000 to Acquire All of Bush Company's