Midland Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midland purchased goodwill as part

Question:

Midland Telecom provides communication services in Iowa, Nebraska, the Dakotas, and Montana. Midland purchased goodwill as part of the acquisition of Shipley Wireless Enterprises, which had the following figures:

Book value of assets ...........$ 750,000

Market value of assets ...........1,000,000

Market value of liabilities ........ 530,000

Requirements

1. Journalize the entry to record Midland’s purchase of Shipley Wireless for $ 320,000 cash plus a $ 480,000 note payable.

2. What special asset does Midland’s acquisition of Shipley Wireless identify? How should Midland Telecom account for this asset after acquiring Shipley Wireless? 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...