First Company purchased Second Company for $20,000,000 cash.At the time of purchase,Second Company's assets had a market value of $30,000,000 and the liabilities had a market value of $14,000,000.At the time of purchase,Second Company's assets had a book value of $14,000,000 and the liabilities had a book value of $7,000,000.What amount of goodwill is recorded?

Question

Quizplus · Accepted Answer

Fair value of assets $30,000,000- fair value of liabilities $14,000,000 = $16,000,000
Goodwill = Cash paid $20,000,000 - $16,000,000 = $4,000,000

First Company Purchased Second Company for $20,000,000 Cash