### Determine the amount of goodwill

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On January 3, 2003, Austin Corp. purchased 25% of the voting common stock of Gainsville Co., paying \$2,000,000. Austin decided to use the equity method to account for this investment. At the time of the investment, Gainsville's total stockholders' equity was \$6,000,000. Gainesville had franchise agreements with a fair market value of \$400,000. Austin gathered the following information about Gainsville's assets and liabilities:

Book Value Fair Market Value
Buildings 10 year life 400,000 500,000
Equipment 5 year life 1,000,000 1,300,000

For all other assets and liabilities, book value and fair market value were equal.

5. What is the amount of goodwill associated with the investment?
A) \$300,000
B) \$500,000
C) \$ 0
D) \$100,000
E) \$400,000

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