Example of Goodwill

Example of Goodwill

Goodwill is excess amount paid for acquiring business i.e. amount exceeds the fair value of net assets. Goodwill is paid for other asset which can not directly recognize but will contribute in future economic benefit.  These asset include the reputation of the acquired business, customer base etc.

Net asset acquired	$ 200,000
Amount paid	$ 250,000

Calculate the Goodwill

Solution

Goodwill is calculated by deducting the net asset from the investment.

Investment in XYZ	$ 250,000
Less: Net value of asset acquired	$ 200,000
Goodwill	$ 50,000