Total stockholders equity of Bringham company is $3,000,000. Thae fair market va

Question

Total stockholders equity of Bringham company is $3,000,000. Thae fair market value of Bringham's net identifiable assets (assets minus liabilities) is $4,000,000. Bobke Corporation makes an offer to purchase Bringham's entire business for $4,800,000.

In this situation:

a. Bringham Company should report goodwill of $800,000 in it's balance sheet.

b. Bringham Company should report goodwill of $1,800,000 in it's balance sheet.

c. Bobke Corporation is willing to pay $1,800,000 for goodwill generated by Bringham, and Bobke will report this goodwill in it's balance sheet if thre purchase is finalized.

d. Bobke corporation is willing to pay $800,000 for goodwill generated by Bringham, and Bobke will report this goodwill in it's balance sheet if the purchase is finalized.

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Explanation / Answer

d. Bobke corporation is willing to pay $800,000 for goodwill generated by Bringham, and Bobke will report this goodwill in it's balance sheet if the purchase is finalized.

If a sale is realized, the new owner of the company lists the difference between book value and the price paid as goodwill in financial statements.

Goodwill = 4,800,000-4,000,000=$800,000

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