Assume Kaledan Company paid $15 million to acquire Roeder Industries. Assume further that Roeder had the following summarized data at the time of the Kaledan acquisition (amounts in millions):

Roeder’s current assets had a current market value of $18 million, long-term assets had a current market value of only $14 million, and liabilities had a market value of $23 million.

Requirements
1. Compute the cost of goodwill purchased by Kaledan Company.

2. Journalize Kaledan’s purchase of Roeder Industries.

3. Explain how Kaledan will account for goodwill.

Transcribed Image Text:

Roeder Industries Liabilities and Equity Total liabilities . Stockholders' equity . Assets $23 Current assets ................ $18 Long-term assets 20 15 $38 $38