Problem:
Cafe Ole Company aquired a fast food resturant for $1,500,000. The fair market values of the assets acquired were as follows. No liabilites assumed.
Equipment= $380,000
Land= $200,000
Building= $680,000
Franchise (5year life) =$120,000
Required:
Question 1: Calculate the amount of goodwill acquired.
Question 2: Prepare the journal entry to record the amortization of the franchise fee at the end of year 1.
Note: Provide support for your rationale.