In the purchase method of merger accounting, a new asset category called goodwill is created.

Name: In the purchase method of merger accounting, a new asset category called goodwill is created.
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Goodwill is created in the purchase method of merger accounting because the acquiring company pays more than the fair value of the net assets of the acquired company. The difference between the purchase price and the fair value of the acquired assets is recorded as goodwill.

In the Purchase Method of Merger Accounting, a New Asset