On January 2, 2019, Bubba and Company paid $5,000,000 in cash to acquire 100% of the Cire

Question:

On January 2, 2019, Bubba and Company paid $5,000,000 in cash to acquire 100% of the Cire Company's voting common stock. Cire's balance sheet on that date showed the following balances in its accounts:

Cire Company

Balance Sheet

December 31, 2018

Plant and Equipment ...................... $ 5,574,900

Mortgage Payable ............................ $4,324,900

Stockholders Equity ......................... 1,250,000

Total ................................................... $5,574,900

The appraised value of Cire's net assets was $1,400,000 greater than its book value on the date of acquisition.

Required

a. Compute the amount of goodwill to be recorded on the date of acquisition.

b. How is goodwill accounted for subsequent to the date of acquisition?

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... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...

Fantastic news! We've Found the answer you've been seeking!