Question

Kosher Pickle Company acquires all the outstanding stock of Midwest Produce for $15.0 million. The fair value of Midwest's assets is $11.9 million. The fair value of Midwest's liabilities is $1.7 million. Calculate the amount paid for goodwill. (Enter your answer in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).)

Answer 1

Given Information:

Fair value of consideration paid = $15 million

Fair value of Midwest's assets=$11.9 million

Fair value of  Midwest's liabilities=$1.7 million

Required Information:

Amount paid for goodwill = ?

Answer:

Amount paid for goodwill = 4.8 million

Explanation:

The amount of goodwill can be calculated by

Amount of goodwill = Fair value of consideration paid - Fair value of net identifiable assets

The Fair value of net identifiable assets is found by

Fair value of net identifiable assets = Fair value of Midwest's assets - Fair value of Midwest's liabilities

Fair value of net identifiable assets = 11.9 - 1.7

Fair value of net identifiable assets = 10.2 million

Therefore, the amount paid for goodwill is

Amount paid for Goodwill = 15 - 10.2

Amount paid for Goodwill = 4.8 million