Question

On january 1, 2017, robinson company purchased franklin company at a price of $3,870,000. the fair market value of the net assets purchased equals $2,840,000. 1. what is the amount of goodwill that robinson records at the purchase date?

Answer 1

What is Goodwill? It is an intangible asset a company accounts on its balance sheet when it purchases a new business.

Goodwill = the price paid for the acquired company minus the fair market value of its net identifiable assets.

So the amount of goodwill that Robinson records at the purchase date would be:

= 3,870,000 – 2,840,000

= 1,030,000 is the answer.