On January 1, 2009, Jeffrey Company purchased Perrow Company at a price of $2,500,000. The fair
market value of the net assets purchased equals $1,800,000.
1. What is the amount of goodwill that Jeffrey records at the purchase date?
2. Explain how Jeffrey would determine the amount of goodwill amortization for the year ended
December 31, 2009.
3. Jeffrey Company believes that its employees provide superior customer service, and through their efforts,
Jeffrey Company believes it has created $900,000 of goodwill. How would Jeffrey Company
record this goodwill?
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