E7-41B. (Learning Objective 5: Computing and accounting for goodwill) Assume Golden paid €20 million to purchase Southwest.com. Assume further that Southwest had the following summarized data at the time of the Golden acquisition (amounts in millions):

Southwest’s long-term assets had a current market value of only €18 million.

Requirements 1. Compute the cost of goodwill purchased by Golden.
2. Journalize Golden’s purchase of Southwest.
3. Explain how Golden will account for goodwill in the future.

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Assets Southwest.com Liabilities and Equity Current assets 10 Total liabilities..... 25 Long-term assets 22 Shareholders' equity. 7 32 32