The Fair Market Value of the Fixed Assets of Markco

question 306

Multiple Choice

The fair market value of the fixed assets of Markco, Inc. is $8,500.
Big-T paid $13,000 for Markco, Inc. with funds from a long-term debt offering. The purchase method of accounting is used.
What is the amount of goodwill on the books of Big-T as a result of the merger?

• A) $2,000
• B) $4,500
• C) $5,000
• D) $7,000
• E) $9,000

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Definitions:

Prices

The amount of money required to purchase goods or services, set by supply and demand in a market.

Market Price

The present rate at which a service or asset is available for purchase or sale.

Value Loss

The reduction in the value of an asset, investment, or product, often due to market changes, deterioration, or obsolescence.

Gift

A voluntary transfer of property or funds from one individual to another without expectation of payment or compensation.