Hunt Company is considering purchasing a competing company in order to expand its marketshare. Estimates of the excess of the value of the individual assets, less liabilities to be assumed,range from $50,000 to $60,000, depending on the manner in which that excess is calculated. Huntbelieves it can purchase the competitor for a direct cash outlay of $700,000, which is only $25,000more than the value of the individual assets less the liabilities that Hunt will assume. AssumingHunt makes the purchase for $700,000, at what amount should goodwill be recorded? Brieflyexplain your answer.
Hunt Company is considering purchasing a competing company in order to expand its marketshare. Estimates of the excess of the value of the individual assets, less liabilities to be assumed,range from $50,000 to $60,000, depending on the manner in which that excess is calculated. Huntbelieves it can purchase the competitor for a direct cash outlay of $700,000, which is only $25,000more than the value of the individual assets less the liabilities that Hunt will assume. AssumingHunt makes the purchase for $700,000, at what amount should goodwill be recorded? Brieflyexplain your answer.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Hunt Company is considering purchasing a competing company in order to expand its market
share. Estimates of the excess of the value of the individual assets, less liabilities to be assumed,
range from $50,000 to $60,000, depending on the manner in which that excess is calculated. Hunt
believes it can purchase the competitor for a direct cash outlay of $700,000, which is only $25,000
more than the value of the individual assets less the liabilities that Hunt will assume. Assuming
Hunt makes the purchase for $700,000, at what amount should
explain your answer.
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