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4 October, 04:53

On September 1, 2020, Winans Corporation acquired Aumont Enterprises for a cash payment of $700,000. At the time of purchase, Aumont's balance sheet showed assets of $620,000, liabilities of $200,000, and owners' equity of $420,000. The fair value of Aumont's assets is estimated to be $800,000.

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  1. 4 October, 05:01
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    Goodwill = $100,000

    Explanation:

    As Winans Corporation acquired Aumont for a cash payment, the following table shows the goodwill acquired by Winans-

    Acquisition price (Purchase) $700,000

    Less: Fair value of net assets

    Market price of assets $ 800,000

    Market price of liabilities $ (200,000) (600,000)

    Goodwill $100,000

    Note: Assets need to be valued as a market price. Therefore, $620,000 amounts of assets will not be shown during the deduction.
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