Dougs Diner acquired a fast-food restaurant for $1,500,000. The fair market values of the assets acquired were

Question:

Doug’s Diner acquired a fast-food restaurant for $1,500,000. The fair market values of the assets acquired were as follows. No liabilities were assumed.

Equipment ..........$380,000

Land ............. 200,000

Building ........... 680,000

Franchise (5-year life) ..... 120,000

Required

a. Calculate the amount of goodwill acquired.

b. Prepare the journal entry to record the amortization of the franchise fee at the end of year 1.

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...