On June 1, 2014, Gamma Company acquired all of the net assets of Pi Company for $140,000 cash. The two companies merged, with Gamma Company surviving. On the date of acquisition, Pi Companys balance sheet included the following: On the date of acquisition, the inventory had a fair value of $12,000 and the property and equipment had a fair value

On June 1, 2014, Gamma Company acquired all of the net assets of Pi Company for $140,000 cash. The two companies merged, with Gamma Company surviving. On the date of acquisition, Pi Company€™s balance sheet included the following:

On the date of acquisition, the inventory had a fair value of $12,000 and the property and equipment had a fair value of $180,000. The fair value of the liabilities equaled their book value.
Required:
1. How much goodwill was involved in this merger? Show computations.
2. Give the journal entry that Gamma Company would make to record the merger on June 1,2014.

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...