Question

Annapolis Company was recently sold for $470,000. Annapolis had assets & liabilities appraised at the time...

Annapolis Company was recently sold for $470,000. Annapolis had assets & liabilities appraised at the time of the sale in the amounts of:

Item

Amount

Accounts Receivable assumed by buyer

$135,000

Inventory

$275,000

Property, Plant & Equipment (net)

$500,000

Notes Payable assumed by buyer

$655,000

Using this information, how much should be recorded as Goodwill for this transaction?

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Answer #1

Solution

Computation of amount to be recorded as Goodwill in the transaction:

Purchase price = $470,000

Appraised value of asset and liabilities –

Accounts Receivable assumed by buyer   $135,000

Inventory                                                  $275,000

Property Plant and Equipment                  $500,000
total                                                           $910,000

Less: notes payable assumed                    $655,000

Fair value of Annapolis assets and liabilities        $255,000

Goodwill = $470,000 - $255,000 = $215,000

Hence, Goodwill to be reported for this transaction = $215,000

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