In 2014, First Company purchased Second Company for $16,000,000 cash. At the tim

Question

In 2014, First Company purchased Second Company for $16,000,000 cash. At the time of purchase, Second Company's assets had a fair market value of $28,000,000 and the liabilities had a fair market value of $13,000,000. At the time of purchase, Second Company's assets had a book value of $10,000,000 and the liabilities had a book value of $7,000,000. What amount of goodwill is recorded?

Select one:

a. $13,000,000

b. $1,000,000

c. $3,000,000

d. $12,000,000

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Question text

Inventory turnover is:

Select one:

a. 4.90.

b. 4.53.

c. 4.22.

d. 3.96.

Explanation / Answer

Purhcase consideration = Fair value of assets - Fair value of liabilities = 28000000 - 13000000

= 15000000

Goodwill is the excess of cash paid over purchase consideration

Goodwill = 16000000 - 15000000 = 1000000

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