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kosher pickle company acquires all the outstanding stock of midwest produce for $10.0 million. the fair value of midwest's assets is $7.0 million. the fair value of midwest's liabilities is $.8 million. calculate the amount paid for goodwill.

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tutorconsortium127

The amount paid for goodwill is $3.8 million.  Goodwill is an intangible asset acquired when one company buys another.

What is fair value?

  • Fair value is a rational and unbiased estimate of the potential market price of a good, service, or asset in accounting and in most schools of economic thought.
  • When both the buyer and seller freely agree on a price, fair value is the estimated price at which an asset is bought or sold.
  • Individuals and businesses can determine the fair value of an asset by comparing its current market value, growth potential, and replacement cost.
  • The owner of Company B believes he can sell the stock at $50 per share once he acquires it, so he purchases a million shares at the original price.

Therefore,

The term for computing charity is given by;

Goodwill = Consideration paid– Fair value of net identifiable assets

where;

Consideration paid = $10.0 million

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

Midwest's assets = $7.0 million

Midwest's liabilities = $.8 million

Fair value of net identifiable assets = (7.0 M- 0.8 M)

= 6.2 million

Replace in the expression below;

Goodwill = Consideration paid – Fair value of net identifiable assets

Goodwill = 10.0 M- 6.2 M

Goodwill = 3.8 million

To learn more about fair value, refer to:

https://brainly.com/question/28240645

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