₦Plant and Machinery190000Motor Vehicle170000Stock60000Current Liabilities50000Purchase consideration400000
Determine the amount of goodwill.
Answer Details
To determine the amount of goodwill, we need to first understand what goodwill is. Goodwill is an intangible asset that represents the value of a company's reputation, brand name, customer base, and other intangible factors that contribute to its overall value.
In this case, we have been given a balance sheet that includes the purchase consideration, which is the amount paid for the acquisition of another company. The purchase consideration includes the fair market value of the assets and liabilities of the company being acquired.
To calculate the goodwill, we need to subtract the fair market value of the net assets acquired from the purchase consideration. The net assets acquired are the total assets acquired minus the total liabilities acquired.
The fair market value of the net assets acquired is calculated as follows:
Plant and Machinery: ₦190,000
Motor Vehicle: ₦170,000
Stock: ₦60,000
Total Assets: ₦420,000
Current Liabilities: ₦50,000
Net Assets: ₦370,000
Therefore, the fair market value of the net assets acquired is ₦370,000.
To calculate the goodwill, we subtract the fair market value of the net assets acquired from the purchase consideration:
Goodwill = Purchase Consideration - Fair Market Value of Net Assets Acquired
Goodwill = ₦400,000 - ₦370,000
Goodwill = ₦30,000
Therefore, the amount of goodwill in this case is ₦30,000.