Target Brand purchased all of the assets of Walmart for $3,000,000 on July 1, 2019. The...
Target Brand purchased all of the assets of Walmart for
$3,000,000 on July 1, 2019. The fair
market value of walmarts identifiable net assets is $2,400,000. How
much could Target deduct as an
amortized expense for Walmarts goodwill in 2019?
a. Zero
b. $20,000
c. $40,000
d. $600,000
e. none of the above
Homework Answers
Answer: a
The amount is zero. Goodwill can’t be amortized.
Goodwill is an intangible asset, since it can’t be touched or felt; it may arise when the purchase price is higher than the fair market value in the process of accusation.
Amount of goodwill = Purchase price – fair market value
= 3,000,000 – 2,400,000
= $600,000
This goodwill may loss its value by the course of time; in that case the impairment process could be applied; but in no way goodwill could be amortized, since this is the business value but not for the attribution to other asset, which depreciation has.
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