Bennys Restaurants acquired Hungry Boy Diners. The financial records of Hungry Boy Diners included the following: Book

Question:

Benny’s Restaurants acquired Hungry Boy Diners. The financial records of Hungry Boy Diners included the following:

Book Value of Assets................................ $2.4 million

Market Value of Assets............................. 2.7 million

Liabilities................................................... 2.2 million

Requirements

1. Make the journal entry to record Benny’s Restaurants’ purchase of Hungry Boy Diners for $3 million cash, including any goodwill.

2. How should Benny’s Restaurants account for this goodwill after acquiring Hungry Boy Diners? Explain in detail.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of...