Accounting for Goodwill Fred Graf, owner of Graf Interiors, is negotiating for the purchase of Terrell Galleries.

Question:

Accounting for Goodwill Fred Graf, owner of Graf Interiors, is negotiating for the purchase of Terrell Galleries. The balance sheet of Terrell is given in an abbreviated form below.

Graf and Terrell agree that:

1. Land is undervalued by $50,000.

2. Equipment is overvalued by $5,000.

Terrell agrees to sell the gallery to Graf for $380,000. Prepare the entry to record the purchase of Terrell Galleries on Graf’s books.

Goodwill
Goodwill is an important concept and terminology in accounting which means good reputation. The word goodwill is used at various places in accounting but it is recognized only at the time of a business combination. There are generally two types of... Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...