Assuming Involved's accounts are correctly valued within the company's financial statements, what amount of goodwill should be recognized for the Investment in Involved?
A) $(100,000.)
B) $ 0.
C) $ 200,000.
D) $ 812,500.
E) $2,112,500.

Question

Quizplus · Accepted Answer

The correct answer is D because the goodwill is calculated as the excess of the purchase price over the fair value of the net assets acquired. In this case, the purchase price is $2,500,000 and the fair value of the net assets acquired is $1,687,500. Therefore, the goodwill is $2,500,000 - $1,687,500 = $812,500.

Assuming Involved's Accounts Are Correctly Valued Within the Company's Financial