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Rommer Company purchases Daley Inc. for $4,700,000 cash on January 1, 2020. The book value of Daley Company's net assets, as reflected on its December 31, 2019 statement of financial position is $4,000,000. An analysis by Rommer on December 31, 2019 indicates that the fair value of Daley's tangible assets exceeded the book value by $525,000, and the fair value of identifiable intangible assets exceeded book value by $150,000. How much goodwill should be recognized by Rommer Company when recording the purchase of Daley Inc.

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Answer:

$25,000

Explanation:

Calculation to determine How much goodwill should be recognized by Rommer Company when recording the purchase of Daley Inc.

Using this formula

Goodwill=Beginning cash-Ending book value-Fair value tangible assets-Fair value intangible assets

Let plug in the formula

Goodwill=$4,700,000-$4,000,000-$525,000-$150,000

Goodwill=$25,000

Therefore the goodwill that the company should be recognized by Rommer Company when recording the purchase of Daley Inc. $25,000

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