Question

Please help me understand what this entry could mean. Why would there be a credit to Goodwill? What does that mean when there's a credit to Goodwill?

Why is there a debit to Additional Paid in Capital? What is Additional Paid in Capital? Why would you make a debit to this account?

1 2 3 4 5 A B Date Num 10/01/2019 9-37R 10/01/2019 9-37R 10/01/2019 9-37R C Memo Reverse of GJE 9-37 -- Pd. Kevin Murphy on 4/17/2019-true-up for purchase Pd. Kevin Murphy on 4/17/2019-true-up for purchase D Account 1850. Goodwill 2720 - Additional Paid In Capital E F Debit Credit 8,684.29 8,684.29 8,684.298,684.29

Answer 1

There is a credit to the Goodwill means the depreciation or amortization or written-down of the goodwill. The goodwill is a fictitious assets which is created on over-paying on fair value of any acquisition. The goodwill could be planned to written-off as the acquired concern earns profits. So, to reduce or write-off a goodwill, a credit is the Goodwill account.

The Additional Paid in Capital (APIC) is the premium received on share issue over and above the par value of the share. It is the share premium amount in the Stockholders’ Equity section which can be used to write-off any fictitious asset. So, while amortization of the goodwill, the APIC is credited with the amortization amount.