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

Question:

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

Book value of assets ............ $ 800,000

Market value of assets ............900,000

Market value of liabilities .........540,000

Requirements

1. Journalize the entry to record Heartland’s purchase of Shurburn Wireless for $ 360,000 cash plus a $ 540,000 note payable.

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