Assume Voltron Company paid $22 million to acquire Brighton Industries. Assume further that Brighton had the following summarized data at the time of the Voltron acquisition (amounts in millions):

Brighton’s current assets had a current market value of $11 million, long-term assets had a current market value of only $19 million, and liabilities had a market value of $23 million.

Requirements

1. Compute the cost of goodwill purchased by Voltron.

2. Journalize Voltron’s purchase of Brighton Industries.

3. Explain how Voltron will account for goodwill.

Transcribed Image Text:

Brighton Industries Liabilities and Equity Total liabilities . Stockholders' equity . Assets $23 14 Current assets ... $1 26 Long-term assets $37 $37