Computation of goodwill

Assume that an investor purchases $100\%$ of an investee company for $$15$ million. The fair values of the identifiable net assets are as follows:

Tangible net assets

Receivables, inventories, PPE, payables, and accruals $$5,250,000$

Intangible assets: Patents, customer lists, trade name, software, etc. $3,000,000$

Research and development assets: Research projects in process at the investee company $3,750,000$

In addition to the purchase price, the investor also incurs acquisition$-$related costs amounting to $ $1,350,000$ for professional fees and the internal

allocation of overhead relating to the purchase.

a$.$ How much of the purchase price is assigned to Goodwill?

million

b$.$ How do we account for Goodwill subsequent to the acquisition?

OGoodwillis reported on the consolidated balance sheet, amortized over its useful life, and written$-$down if impaired.

OGoodwill is reported on the consolidated balance sheet and remains on the balance sheet u until deemed impaired.

OGoodwill is not reported on the consolidated balance sheet.