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One company acquired another in a transaction in which $100,000 of the acquisition price is assigned to goodwill. Several years later, a worksheet is being produced to consolidate these two companies. How is the reported value of the goodwill determined at this date?

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Answer:

How is the reported value of the goodwill determined at this date?

The amount of the goodwill must remain the same unless it is affected by the sale of a business unit that originated with the goodwill

Explanation:

Lambert's loan payable and the receivable held by Jenkins are intra-entity accounts. The consolidation process offsets these reciprocal balances.

The $100,000 is neither a debt to nor a receivable from an unrelated (or outside) party and is, therefore, NOT REPORTED in consolidated financial statements.

Any interest income/expense recognized on this loan is also intra-entity in nature and must likewise be eliminated

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