(b) Tom Benyon would record a credit to Cash for $240,000, debits to individual asset accounts for the inventory, plant assets, identifiable intangible assets and other assets acquired for their fair market values, credits to liability accounts (at market value) for any liabilities assumed, and a debit to Goodwill for $40,000.
Goodwill is not to be amortized (written off) because it is considered to have an indefinite life, but goodwill must be written down if its value is determined to have declined (been permanently impaired). Goodwill appears on the balance sheet under Intangible Assets.
ILLUSTRATION 9-2 SUMMARY OF REQUIREMENTS FOR RECORDING GAINS AND LOSSES ON EXCHANGES OF PLANT ASSETS (When the Exchange has Commercial Substance) (L.O. 8)