Northern Equipment Corporation purchased all the outstanding common stock of Pio

Question

Northern Equipment Corporation purchased all the outstanding common stock of Pioneer Equipment Rental for $5,600,000 in cash. The book values and fair values of Pioneer’s assets and liabilities were:

Calculate the amount paid for goodwill.

Record Northern Equipment's acquisition of Pioneer Equipment Rental.

Book Value Fair Value   Receivables $ 750,000 $ 650,000   Property, plant, and equipment 4,100,000 4,800,000   Intangible assets 110,000 700,000   Liabilities (750,000 ) (750,000 )         Net assets $ 4,210,000 $ 5,400,000

Explanation / Answer

Goodwill = Amount paid - Net worth on the basis of fair value

              = 5,600,000 - 5,400,000

              = $ 200,000

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