The fair value of the assets and liabilities for Zane's Restaurant were $450,000 and $160,000, respectively. If Reiner Company pays $325,000 cash for the restaurant and assumes its existing liabilities, what amount of goodwill would Reiner record?
A) $25,000.
B) $35,000.
C) $55,000.
D) $125,000.

Question

Quizplus · Accepted Answer

Goodwill is calculated as the difference between the purchase price and the net identifiable assets acquired. Therefore, the goodwill in this scenario is calculated as follows:

Purchase price = $325,000
Net identifiable assets acquired = $450,000 - $160,000 = $290,000

Goodwill = Purchase price - Net identifiable assets acquired
Goodwill = $325,000 - $290,000
Goodwill = $35,000

Therefore, the answer is B.

The Fair Value of the Assets and Liabilities for Zane's