During 2016, Manning Corporation purchased 100% of the outstanding voting common stock shares of Brady Corporation for $4.0 million. Brady's assets had a book value of $5.0 million and fair value of $6.5 million. The book value as well as fair value of Brady's liabilities equaled $3.2 million. How much was paid for goodwill?

Question

Quizplus · Accepted Answer

Goodwill is calculated as the purchase price minus the fair value of net identifiable assets. The fair value of net identifiable assets is $6.5 million (assets) - $3.2 million (liabilities) = $3.3 million. Goodwill is $4.0 million (purchase price) - $3.3 million = $700,000.

During 2016, Manning Corporation Purchased 100% of the Outstanding Voting