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Debit Company purchased Credit Company for $1,000,000 in cash in order to
expand its product line. The market value of Credit Company’s assets and
liabilities on the acquisition date were $3,000,000 and $2,500,000,
respectively.
Compute
the cost of the goodwill purchased by Debit Company and journalize the entry to
record the acquisition. How will the company account for this goodwill in
future accounting periods?
