1.
Concept Introduction:
The amount of goodwill that R records at the date of purchase.
2.
Concept Introduction:
Goodwill: The asset which has the value of the business over and above its net assets value is stated as goodwill. This excess value a business may derive generally due to superior management, skilled workforce, quality product and services, good location, and good customer and supplier relations. Goodwill is generally recorded when a business purchase occurs, it is recorded as assets.
Whether the goodwill is amortized for financial reporting.
3.
Concept Introduction:
Goodwill: The asset which has the value of the business over and above its net assets value is stated as goodwill. This excess value a business may derive generally due to superior management, skilled workforce, quality product and services, good location, and good customer and supplier relations. Goodwill is generally recorded when a business purchase occurs, it is recorded as assets.
Whether R should record value created from superior customer service as goodwill.
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FINANCIAL AND MANAGERIAL ACCOUNTING
- Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. A. What is the amount of goodwill in this transaction? B. What is Farm Fresh Agriculture Companys journal entry to record the purchase of Sunny Side Egg Distribution? C. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?arrow_forwardOn May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.arrow_forwardTender, Inc. dominates the snack-food industry with its Tasty-Chip brand. Assume that Tender, Inc. purchased Concord Snacks, Inc. for $10.4 million cash. The market value of Concord Snacks' assets is $18.6 millia and Concord Snacks has liabilities of $12.7 mllion. Requirements 1. Compute the cost of the goodwill purchased by Tender. 2. Explain how Tender will account for goodwill in future years. Requirement 1. Compute the cost of the goodwill purchased by Tender. (Enter amounts in millions to the nearest tenth of a million, XX) Market value of Concord Snacks' net assets: Less Cost of goodwill Requirement 2. Explain how Tender will account for goodwill in future years. has increased decreased in value. If the goodwill's value has increased, future Tender, Inc. will determine whether its goodwill or decreased, In years, V But goodwill's value has if Choose from any list or enter any number in the input fields and then continue to the next question.arrow_forward
- Robinson Company purchased Franklin Company at a price of $2,500,000. The fair market value of thenet assets purchased equals $1,800,000. Does Robinson amortize goodwill at year-end for financial reporting purposes? If so, over how many years is it amortized?arrow_forwardIn which of the following situations would Martinez Indus-tries include goodwill in its balance sheet? a. The fair market value of Martinez’s net identifiableassets amounts to $2,000,000. Normal earnings for thisindustry are 15 percent of net identifiable assets. Netincome for the past five years has averaged $390,000.b. Martinez spent $800,000 during the current year for research and development for a new product that prom-ises to generate substantial revenue for at least 10 years. c. Martinez acquired Baxter Electronics at a price in excess ofthe fair market value of Baxter’s net identifiable assets. d. A buyer wishing to purchase Martinez’s entire opera-tion has offered a price in excess of the fair market value of the company’s net identifiable assets.arrow_forwardBuchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth $4,500,000. What is the amount of goodwill in this transaction? What is Buchanan’s journal entry to record the purchase of McLaren? What journal entry should Buchanan write when the company internally generates additional goodwill in the year following the purchase of McLaren?arrow_forward
- Topic: Intangible Assets (Goodwill) Guinevere Company is planning to sell the business to new interests. The cumulative net earnings for the past five years amounted to P16,500,000 including expropriation loss of P1,500,000. The normal rate of return is 20%. The fair value of net assets of entity at current year end was P10,000,000. What is the amount of goodwill if: 1. Excess earnings are purchased for 5 years? A. 8,000,000 B. 4,000,000 C. 5,000,000 D. 4,500,000 2. Excess earnings are capitalized at 25%? A. 7,200,000 B. 6,400,000 C. 8,000,000 D. 3,600,000 3. Annual average earnings are purchased for 3 years? A. 10,800,000 B. 18,000,000 C. 4,800,000 D. 5,400,000 4. Annual average earnings are capitalized at 25%? A. 1,600,000 B. 3,600,000 C. 4,400,000 D. 2,000,000 5. Excess earnings are discounted at 12% for 5 years? (the PV of an ordinary annuity of 1 for 5 years at 12% is 3.60) A. 12,960,000 B. 10,800,000 C. 5,760,000 D. 7,200,000arrow_forwardhandy snacks inc dominates the snack-food industry with its salty chip brand. assume that handy snacks inc purchased super snacks, Inc, for 5.2 million cash. the market value of super snacks assets is 9 million, and super snacks has liabilities with a market value of 7.1 million 1. compute the cost of the Goodwill purchased by handy snacks 2. explain how handy snacks will account for Goodwill in future yearsarrow_forwardANEMONE Company engaged your services to compute the goodwill in the purchase of another company which provided the following: Net income Net assets 2018 P 2,000,000 P 7,800,000 2019 2,500,000 8,700,000 2020 3,900,000 9,000,000 Goodwill is measured by capitalizing excess earnings at 25% with normal on average net assets at 20% How much is the goodwill?arrow_forward
- Brinker International Inc.the parent of Chili's, acquired Thallicious for $32,170,000. The fair value of all Thailicioustangible and intangible assets was $30.000.000 Brinker will amortize any goodwill over the maximum number of years allowedWhat is the annual amortization of goodwill for this acquisition?arrow_forwardRobinson Company purchased Franklin Company at a price of $2,500,000. The fair market value of thenet assets purchased equals $1,800,000. What is the amount of goodwill that Robinson records at the purchase date?arrow_forwardOn January 1, 2018, Paye Company purchased Che Company at a cost that resulted in recognition of goodwill of P2,000,000. During the first quarter of 2018 Paye Company spent an additional P 800 000 on expenditures designed to develop and maintain goodwill by training and hiring new employees. Due to these expenditures, on December 31, 2018, Paye Company Estimated the benefit period of goodwill was indefinite. On December 31, 2018, what amount should be reported as goodwill?arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College