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Calculating Goodwill

Kelley Company's December 31, 2014 balance sheet reports assets of $2,000,000 and liabilities of $1,400,000. All of Kelley's book values approximate their fair value, except for land, which has a fair value that is $500,000 greater than its book value. On December 31, 3014, Scotch Corporation paid $2,100,000 to acquire Kelley. What amount of goodwill should Scotch record as a result of this purchase?

a. $100,000
b. $200,000
c. $500,000
d. $1,000,000

Solution Summary

This solution calculates the amount of goodwill that Scotch should record as a result of the purchase.