On January 3, 2008, Austin Corp. purchased 25% of the voting common stock of Gainesville Co., paying $2,500,000. Austin decided to use the equity method to account for this investment. At the time of the investment, Gainesville's total stockholders' equity was $8,000,000. Austin gathered the following information about Gainesville's assets and liabilities. Book Value Fair Value Buildings (10 year life) $400,000 $500,000 Equipment (5 year life) $1,000,000 $1,300,000 Franchises (8 year life) $0 Calculate the goodwill? $400,000

Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 11MCQ
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Provide this question solution general accounting

On January 3, 2008, Austin Corp. purchased 25% of the voting common stock of Gainesville
Co., paying $2,500,000. Austin decided to use the equity method to account for this
investment. At the time of the investment, Gainesville's total stockholders' equity was
$8,000,000. Austin gathered the following information about Gainesville's assets and
liabilities.
Book Value Fair Value
Buildings (10 year life)
$400,000
$500,000
Equipment (5 year life) $1,000,000 $1,300,000
Franchises (8 year life)
$0
Calculate the goodwill?
$400,000
Transcribed Image Text:On January 3, 2008, Austin Corp. purchased 25% of the voting common stock of Gainesville Co., paying $2,500,000. Austin decided to use the equity method to account for this investment. At the time of the investment, Gainesville's total stockholders' equity was $8,000,000. Austin gathered the following information about Gainesville's assets and liabilities. Book Value Fair Value Buildings (10 year life) $400,000 $500,000 Equipment (5 year life) $1,000,000 $1,300,000 Franchises (8 year life) $0 Calculate the goodwill? $400,000
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