E7-27A. (Learning Objective 5: Computing and accounting for goodwill) Assume Holden paid $15 million to purchase Northshore.com. Assume further that Northshore had the following summarized data at the time of the Holden acquisition (amounts in millions):

Northshore’s long-term assets had a current market value of only $20 million.
Requirements 1. Compute the cost of goodwill purchased by Holden.
2. Journalize Holden’s purchase of Northshore.
3. Explain how Holden will account for goodwill in the future.

Transcribed Image Text:

Current assets Assets Long-term assets. Northshore.com Liabilities and Equity $13 Total liabilities. 23 $36 Shareholders' equity.. $25 11 $36