The balance sheet of Cattleman's Steakhouse shows assets of $86,400 and liabilities of $15,000.The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000.Longhorn paid Cattleman's $95,000 to acquire it.Longhorn should record goodwill on this purchase of:

Question

Quizplus · Accepted Answer

Goodwill is calculated as the difference between the purchase price and the net assets acquired (assets - liabilities). In this case, the net assets of Cattleman's Steakhouse are $86,400 - $15,000 = $71,400. The fair value of the net assets is $90,000 - $15,000 = $75,000. Therefore, the goodwill on this purchase is:
Purchase price - fair value of net assets = $95,000 - $75,000 = $20,000. Thus, the correct answer is C) $20,000.

The Balance Sheet of Cattleman's Steakhouse Shows Assets of $86,400