Sage Ltd is considering the purchase of Rosemary Ltd, which produces a product that Sage Ltd uses

Question:

Sage Ltd is considering the purchase of Rosemary Ltd, which produces a product that Sage Ltd uses in its manufacturing process. Relevant data for Rosemary Ltd are:

Fair value of identifiable assets

Fair value of identifiable liabilities

$1 800000

720000

Required

A. Determine the price Sage Ltd would pay for goodwill in acquiring Rosemary Ltd if the total consideration transferred in the business combination was $1 500000, in cash.

B. Prepare entries for Sage Ltd in general journal form to record the acquisition of Rosemary Ltd for $1000000 cash.

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...

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