On 1 June 2015 Blender Company acquired for $300 000 cash the business of Madcap Inc. The carrying amount of Madcap Inc's net assets at the time of the acquisition was $255 000 while independent valuers calculated their fair value at $275 000. Blender Company should debit 'Goodwill' for the amount of:

Question

Quizplus · Accepted Answer

The fair value of Madcap Inc's net assets was $275,000 while the purchase price was $300,000. This means that the excess paid over the fair value of the net assets is $25,000 ($300,000 - $275,000). This excess is recorded as goodwill, so Blender Company should debit "Goodwill" for $25,000.

On 1 June 2015 Blender Company Acquired for $300 000