How to Compute the cost of goodwill
Potters, Inc. has acquired several other companies. Assume that Potters purchased Kate Co., for $9,000,000 cash. The book value I
Kate’s assets is $17,000,000 (market value, $18,000,000), and it has liabilities of $12,000,000.
1. Compute the cost of goodwill purchased by Potters.
2. Record the purchase of Kate Co. by Potters.
Requirement 1. Compute the cost of goodwill purchased by Potters.
Cost of goodwill purchased:
Market value of Kate’s net assets:
Cost of goodwill purchased