### Farm Fresh Agriculture Company's Acquisition of Sunny Side Egg Distribution**Scenario:**Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000.#### Questions:a. **What is the amount of goodwill in this transaction?** - The goodwill is calculated as the purchase price minus the net assets. Here, the goodwill is $400,000 - $390,000 = **$10,000**.b. **What is Farm Fresh Agriculture Company’s journal entry to record the purchase of Sunny Side Egg Distribution?** - **Debit:** Net Assets - $390,000 - **Debit:** Goodwill - $10,000 - **Credit:** Cash - $400,000c. **What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?** - **Debit:** Impairment Loss - $9,000 (calculated as $10,000 original goodwill - $1,000 remaining value) - **Credit:** Goodwill - $9,000This scenario illustrates the accounting treatment for the acquisition of a company, focusing on calculating and adjusting goodwill based on impairment tests.

1. Goodwill=Purchase consideration-Net assets=$400,000-$390,000=$10,000

2. Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? C. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?

2. Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny Side had net assets worth $390,000. a. What is the amount of goodwill in this transaction? b. What is Farm Fresh Agriculture Company's journal entry to record the purchase of Sunny Side Egg Distribution? C. What journal entry should Farm Fresh Agriculture Company write when the company tests for impairment and determines that goodwill is worth $1,000 in the year following the purchase of Sunny Side?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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