Question

Hunt Company is considering purchasing a competing company in order to expand its market share. Estimates of the excess of the value of the individual assets, less liabilities to be assumed, range from $50,000 to $60,000, depending on the manner in which that excess is calculated. Hunt believes it can purchase the competitor for a direct cash outlay of $700,000, which is only $25,000 more than the value of the individual assets less the liabilities that Hunt will assume.

Assuming Hunt makes the purchase for $700,000, at what amount should goodwill be recorded?

Answer 1

solution. Given that Hunt company purchased a competing.company for :$700,000 competing company value of individual assets less Liabilities : $700,000 - $95.000 : $675000 Hence competing company book value = Good will - purchased value paid - Boole value of competing - Company $700,000 - $675000 . ..$25000 Good will = $95000|