Assume Hughes Co. paid $30 million to purchase BaySide.com. Assume further that BaySide had the following summarized

Question:

Assume Hughes Co. paid $30 million to purchase BaySide.com. Assume further that BaySide had the following summarized data at the time of the Hughes Co. acquisition (amounts in millions):

BaySide€™s long-term assets had a current market value of only $31 million, and the liabilities have a market value of $35 million.

Requirements
1. Compute the cost of goodwill purchased by Hughes Co.
2. Journalize Hughes Co.€™s purchase of BaySide.
3. Explain how Hughes Co. will account forgoodwill.

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...