Intermediate Accounting (16th Edition)

Published by Wiley
ISBN 10: 1118743202
ISBN 13: 978-1-11874-320-1

Chapter 12 - Intangible Assets - Review and Practice - Questions - Page 637: 12

Answer

Goodwill is generally the amount paid in excess of fair value during acquisition. For example, if the fair value of a car is 10 dollars and you paid 11 dollars, good will would be the 1 dollar paid in excess. On the other hand, a bargain purchase occurs when the acquisition cost is lower than the fair value. Goodwill can also be defined as the value of business that occurs beyond the value of physical assets e.g., synergy and access to distribution networks.

Work Step by Step

As summarized above.
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