Burrough Corporation concluded that the fair value of Helyar Company was $80,000 and paid that amount to acquire all of its net assets.Helyar reported assets with a book value of $60,000 and fair value of $98,000 and liabilities with a book value and fair value of $23,000 on the date of combination.Burrough also paid $3,000 to a search firm for finder's fees related to the acquisition.What amount will be recorded as goodwill by Burrough Corporation while recording its investment in Helyar?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the excess of the purchase price over the fair value of net assets acquired. The fair value of net assets is $98,000 (assets) - $23,000 (liabilities) = $75,000. The purchase price is $80,000, so goodwill is $80,000 - $75,000 = $5,000. The finder's fee is not included in the goodwill calculation.

Burrough Corporation Concluded That the Fair Value of Helyar Company