Question

The balance sheet of Cattleman's Steakhouse shows assets of $86,400 and liabilities of $15,000. The fair value of the assets is $90,000 and the fair value of its liabilities is $15,000. Longhorn paid Cattleman's $95,000 to acquire all of its assets and liabilities. Longhorn should record goodwill on this purchase of:_______

Answer 1

Answer:

23,600

Explanation:

We can calculate the goodwill by deducting the fair value difference between assets and liabilities from the acquisition price of the company.  

Goodwill = Acquisition price − Fair value difference

Goodwill = 95,000 - 71,400

Goodwill = 23,600

Fair value difference  = Fair value of assets − Fair value of liabilities

Fair value difference =$86,400−15,000

Fair value difference  =$71,400

​