Homework: HW08 Score: 0.38 of 1 pt & S8-13 (similar to) 6 of 9(4 complete) Hw Sc
ID: 2437537 • Letter: H
Question
Homework: HW08 Score: 0.38 of 1 pt & S8-13 (similar to) 6 of 9(4 complete) Hw Score: 32.05%, 2.88 of 9 pts When one media company buys another, goodwill is often the most costly asset acquired. DC Advertising paid $1,034,510 to acquire the Red River Herald, a weekly advertising paper. At the time of the acquisition, the Red River Herald's balance sheet reported total assets of $618,700 and liabilities of $518,700. The fair market value of the Red River Herald's assets was $1,018,700. The fair market value of liabilities was $518,700. How much goodwill did DC Advertising purchase as part of the acquisition of the Red River Heraid? Journalize DC Advertising's aoquisition of the Red River Herald How much goodwill did DC Advertising purchase as part of the acquisition of the Red River Herald? Net Goodwill 1,034,510 500,000 534,510 Joumalize DC Advertising's acquisition of the Red River Herald. (Record debits frst, then credits. Exclude explanations from any journal Date Accounts Debit Choose from any list or enter any number in the input fields and then click Check Answer Clear AllExplanation / Answer
**Goodwill is created when one company acquires another for a price higher than the fair market valueof its assets and liabilities.
Calculation of Goodwill to be recognised on acquisition:
a. Purchase price $1,034,510
b. Net assets purchased
Fair value of the assets $1,018,700
Less: Fair value of the liabilities ($518,700)
Net fair value of assets purchased $500,300
Therefore, Goodwill [a - b] $534,510
Journal entry for the acquisition
Date Account Titles Debit Credit Assets a/c $1,018,700 Goodwill a/c $534,510 Liabilities $518,700 Cash a/c $1,034,510 OR Investment in Red river Herald a/c [Net fair value of assets] $500,000 Goodwill a/c $534,510 To Cash a/c $1,034,510Related Questions
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