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29 January, 19:52

The balance sheet of Cattleman's Steakhouse shows assets of $86,700 and liabilities of $14,500. The fair value of the assets is $90,500 and the fair value of its liabilities is $14,500. Longhorn paid Cattleman's $82,820 to acquire all of its assets and liabilities. Longhorn should record goodwill on this purchase of:

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  1. 29 January, 19:57
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    The missing multiple choices are:

    $12,020

    $2,980

    $10,400

    $6820

    The correct option is $6,820

    Explanation:

    Goodwill is computed as the difference between the acquisition proceeds and fair value of net assets acquired.

    Fair value of net assets=Fair value of asset - fair value of liabilities.

    Fair value of assets is $90,500

    fair value of liabilities is $14,500

    fair value of net assets=$90,500-$14,500

    =$76,000

    Purchase consideration is $82,820

    Goodwill = $$82,820-$76,000

    Goodwil=$6820

    This is the excess of purchase consideration paid over the net assets taken over as a result of the business acquisition
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