On September 1, 2020, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont's balance sheet showed assets of $620,000, liabilities of $200,000, and owners' equity of $420,000. The fair value of Aumont's assets is estimated to be $800,000.

Question

Business

Javon Henson

18 July, 10:04

On September 1, 2020, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont's balance sheet showed assets of $620,000, liabilities of $200,000, and owners' equity of $420,000. The fair value of Aumont's assets is estimated to be $800,000.

+3

Answers (1)

Know the Answer?

Mckenna · Answer 1

Goodwill = $100,000

Explanation:

As Winans Corporation acquired Aumont for a cash payment, the following table shows the goodwill acquired by Winans-

Acquisition price (Purchase) $700,000

Less: Fair value of net assets

Market price of assets $ 800,000

Market price of liabilities $ (200,000) (600,000)

Goodwill $100,000

Note: Assets need to be valued as a market price. Therefore, $620,000 amounts of assets will not be shown during the deduction.