Buyer: $10,000 assets, $8,000 liabilities. Seller: $1,000 assets, $800 liabilities. Buyer pays $500 cash for 100% of the seller. What goodwill is created on the combined balance sheet?

Question

IBPrep · Accepted Answer

Combined liabilities = $8,000 + $800 = $8,800. Combined equity = $2,000 (the seller's $200 equity is wiped).

Buyer: $10,000 assets, $8,000 liabilities. Seller: $1,000 assets, $800 liabilities. Buyer pays $500 cash for 100% of the seller. What goodwill is created on the combined balance sheet?

Answer

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Buyer: $10,000 assets, $8,000 liabilities.