Calculate the amount of goodwill

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Reference no: EM132498080

Thule Inc. has recently purchased the identifiable net assets of Midgard Ltd. The condensed statement of financial position of Midgard Ltd. at the time of purchase follows:

Midgard Ltd.

Statement of Financial Position

31 March 2020

Assets

Cash                               56,000

Land                              151,000

Equipment (net)             196,000

Patent (net)                   28,000

Total assets                 431,000

Liabilities and Equity

Accounts payable                  34,000

Long-term notes                  263,000

Total liabilities                      297,000

Common shares                     50,000

Retained earnings                    84,000

Total equity                           134,000

Total liabilities and equity             431,000

  • During the negotiation, the purchaser and seller agreed that the fair value of the land was $125,000 and the fair value of the patent was $41,000. The final, negotiated purchase price was $175,000.

Required:

Question a) Calculate the amount of goodwill that was included in the purchase of the identifiable net assets of Midgard Ltd.

Question b) Identify three reasons why a company may have goodwill.

Question c) Discuss why internally generated goodwill is not reported on a company's statement of financial position.

Reference no: EM132498080

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