3. Joyful Sound Music Company purchased the net assets (I, e. assets minus liabilities) of Metrodome Company for $845,000. Metrodome is a retailer of music, instrument, and related items. Its net assets have been carried on its own books at a total of $530,000. An appraisal of all of Metrodome's assets and liabilities revealed a net fair market value of $783,000. Joyful is willing to pay extra because of Metrodome's very loyal retail customers, most of whom have dealt exclusively with the company for more than 30 years.
A. what is the amount of goodwill that joyful should record at acquisition of Metrodome?
B. what might cause the purchased goodwill in this situation to become impaired?


Exercise 11-18

A. The amount of goodwill that joyful should record at the acquisition of Metrodome is $315,000.00.
B. If suppliers hiked costs, if consumers no longer believed in the product and no longer bought the product, if the employees were unethical and it became a public scandal, if the brand became associated with substandard quality, and any other component that added value to the balance sheet were impaired, then the parent company would have suffered a loss of goodwill.

You should try to do this yourself first. Use your accounting textbook to work it out. If you have a specific question we will try to help you.

P Ready:

If you will read the entire post you will see that I posted my answer to my question on the bottom of the post! I really do need feedback to see if I got it right. Please, respond soonest.

Lester