Assume that you are charged with assigning fair values related to a $6,080,000 acquisition. You determine that the fair value of the net identifiable tangible assets is $2,960,000. You also conclude that the purchase included a Customer List with a fair value at $544,000.
a. How much Goodwill will you record in this acquisition?
To calculate the amount of goodwill that will be recorded in this acquisition, you need to follow these steps:
Step 1: Determine the fair value of the net identifiable tangible assets:
In this case, the fair value of the net identifiable tangible assets is given as $2,960,000.
Step 2: Calculate the total purchase price:
The total purchase price is the amount of the acquisition, which is $6,080,000.
Step 3: Subtract the fair value of the net identifiable tangible assets from the total purchase price:
$6,080,000 - $2,960,000 = $3,120,000
Step 4: Identify and assign fair values to any other assets or liabilities acquired:
In this case, there is a Customer List with a fair value of $544,000.
Step 5: Subtract the fair value of the other identified assets from the amount calculated in Step 3:
$3,120,000 - $544,000 = $2,576,000
Step 6: The remaining value after deducting the fair value of the other identified assets is the amount of goodwill:
Therefore, the amount of goodwill to be recorded in this acquisition is $2,576,000.