Goodwill , the final item on the asset side, has a special meaning in accounting. It arises when one company buys another company and pays more than the value of its net identifiable assets. Grady Company bought Baker Company, paying $1,400,000 cash. Baker Company’s identifiable assets were judged to be worth $2,500,000, and Grady became responsible for Baker’s liabilities that totaled $500,000. Complete the following calculation:

valuable owned cost Baker’s identifiable assets $________________ less liabilities $________________ Net identifiable assets $________________ Grady paid Baker $ 1,400,000 Therefore, goodwill was $________________