Acquirer Company bought Servile Company for $5,000,000 on January 2, 2004. The fair market value of the individual net assets was $3,500,000. In succeeding years, the fair market value of Servile’s costs and goodwill were as follows:
|
Year |
Fair Market Value of Servile |
Cost of Servile’s Net Assets and Goodwill |
|
2005 |
$7,000,000 |
$7,100,000 |
|
2006 |
7,300,000 |
6,700,000 |
|
2007 |
8,000,000 |
9,300,000 |
Required:
a. What amount of goodwill should be recognized as a result of the acquisition of Servile in 2004?
b. Determine the amounts of the goodwill write offs (if any) in 2005, 2006, and 2007.