Cricketers, Inc. recently purchased Baseball Corp. for $3 million using debt financing. Analysts are in agreement that the fair value for Baseball's assets was around $2.7 million and that the overpayment was for strategic reasons. When Cricketers' accountants record the transaction, they must record:
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A. B. C. D.C
Goodwill is defined as the price paid in excess of the fair market value of the assets of the target firm. Under US GAAP, Goodwill can and should be capitalized only when purchased externally (i.e. internally developed goodwill cannot be capitalized). Therefore, the over-payment of $0.3 million must be recognized separately as goodwill on the balance sheet of Cricketers, Inc.