The balance sheet of Ernie's Restaurant showed total assets of $300,000, liabilities of $80,000 and equity of $270,000. An appraiser estimated the market value of the restaurant assets at $340,000. If Bert Company pays $385,000 cash for the restaurant the amount of goodwill purchased would be:
A)$45,000.
B)$85,000.
C)$115,000.
D)$125,000.

Question

Quizplus · Accepted Answer

$340,000 market value of assets - $80,000 liabilities = $260,000 fair value of Ernie's net assets; $385,000 purchase price - $260,000 fair value = $125,000 goodwill

The Balance Sheet of Ernie's Restaurant Showed Total Assets of $300,000