Problem:
Café Ole' Companuy acquired a fast-food restaurant for $1,500,000. The fair market values of the assets acquired were as follows. No liabilities were assumed.
- Equipment $380,000
- Land $200,000
- Building $680,000
- Franchise (5-year 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: Explain all calculation and formulas.