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Actual Price Paid – $480 million Net Book Value of Company B = $100 + 80 + 60 – 20 – 40 = $180 Excess Purchase Price = Actual Price Paid – Net Book Value of Company B = $480 – 180 = $300 Step 5 – Calculate Goodwill It is the difference between the excess purchase price and fair value adjustments. Popular Course in this category All in One Financial Analyst Bundle (250+ Courses, 40+ Projects) 4. 9 (1, 067 ratings) 250+ Courses | 40+ Projects | 1000+ Hours | Full Lifetime Access | Certificate of Completion Excess Purchase Price – Fair Value Adjustments = $300 – $80 = $220 million. Goodwill Accounting Journal Entries It generally is recorded in the journal books of account only when some consideration in money or money worth is paid for it. The journal entry is generally posted as follows: Acquired asset Dr XXX Goodwill Dr XXX Cash/Bank Cr XXX Let us take an example to understand the goodwill journal entries. The fair value of net assets acquired of ABC & Co in an acquisition is $10 million, and the amount paid is $12 million, then the journal entry is as follows.
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