Rutherford, Corp. aggressively acquired other companies. Assume that Rutherford, Corp. purchased Lancer, Inc. for $ 11 million

Question:

Rutherford, Corp. aggressively acquired other companies. Assume that Rutherford, Corp. purchased Lancer, Inc. for $ 11 million cash. The market value of Lancer’s assets is $ 15 million, and it has liabilities of $ 10 million.

Requirements

1. Compute the cost of goodwill purchased by Rutherford, Corp.

2. Record the purchase of Lancer, Inc. by Rutherford, Corp.

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...