Buyer: $8,000 assets, $6,000 liabilities. Seller: $1,500 assets, $1,000 liabilities. Buyer pays $900 cash for 100% of the seller. What goodwill is created on the combined balance sheet?

Question

IBPrep · Accepted Answer

Combined liabilities = $6,000 + $1,000 = $7,000. Combined equity = $2,000 (the seller's $500 equity is wiped).

Buyer: $8,000 assets, $6,000 liabilities. Seller: $1,500 assets, $1,000 liabilities. Buyer pays $900 cash for 100% of the seller. What goodwill is created on the combined balance sheet?

Answer

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Buyer: $8,000 assets, $6,000 liabilities.