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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Goodwill is calculated as the excess of the cost of an acquired company over the:

a. book value of net assets acquired.

b. fair value of assets acquired.

c. book value of identifiable net assets acquired.

d. fair value of identifiable net assets acquired.

To determine

The how goodwill is calculated.

Explanation

Goodwill:

is defined as a Non- current (Long term) asset that is categorized as an intangible asset.

Goodwill usually arises when a company acquires the entire business of some other company.

Goodwill is also defined as the cost to purchase the business minus the fair market value of the tangible assets, identification of the intangible assets, and the liabilities obtained in the purchase.

It is calculated by:

The fair market value of identifiable assets and liabilities of the company acquired − Purchase price...

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