Cobra Ltd acquired the business of Rattle Ltd for a cash payment of $820 000. The carrying amount of Rattle Ltd's assets at the time of purchase was $690 000 while the independent fair value was $760 000. There were no liabilities. What is the value of the purchased goodwill recorded by Cobra Ltd?

Question

Quizplus · Accepted Answer

The purchased goodwill is the difference between the purchase price and the fair value of the net assets acquired. In this case, the purchase price is $820,000, the fair value of the net assets is $760,000, and the carrying amount of the net assets is $690,000. Therefore, the purchased goodwill is $70,000.

Cobra Ltd Acquired the Business of Rattle Ltd for a Cash