(Learning Objective 6: Computing and accounting for goodwill) Assume Google paid $18 million to purchase MySpace.com. Assume further that MySpace had the following summarized data at the time of the Google acquisition (amounts in millions):
|
Assets |
Liabilities and Equity |
||
|
Current assets |
$10 |
Total liabilities |
$24 |
|
Long term assets |
20 |
Stockholders’ equity |
6 |
|
$30 |
$30 |
Required
1. Compute the cost of goodwill purchased by Google.
2. Journalize Google’s purchase of MySpace.
3. Explain how Google will account for goodwill in the future.