On January 1, 2011, Timothy Company purchased Macys Company at a price of $3,750,000. The fair market value of the net assets purchased equals $2,700,000.
1. What is the amount of goodwill that Timothy records at the purchase date?
2. Explain how Timothy would determine the amount of goodwill amortization for the year ended December 31, 2011.
3. Timothy Company believes that its employees provide superior customer service, and through their efforts, Timothy Company believes it has created $1,350,000 of goodwill. How would Timothy Company record this goodwill?
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