Goodwill Valman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2019, is as follows: Cash $54,000 Current liabilities $64,000 Accounts receivable 65,000 Bonds payable 219,000 Inventory 140,000 Common stock 350,000 Property, plant, and equipment (net) 600,000 Retained earnings 226,000 $859,000 $859,000 At December 31, 2019, Valman discovered the following about EKC: No allowance for uncollectible accounts has been established. An allowance of $4,500 is considered appropriate. The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Valman. The FIFO inventory valuation of the December 31, 2019, ending inventory would be $204,000. The fair value of the property, plant, and equipment (net) is $720,000. The company has an unrecorded patent that is worth $100,000. The book values of the current liabilities and bonds payable are the same as their market values. Required: 1. Compute the value of the goodwill if Valman pays $1,350,500 for EKC. $ fill in the blank
Goodwill Valman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2019, is as follows: Cash $54,000 Current liabilities $64,000 Accounts receivable 65,000 Bonds payable 219,000 Inventory 140,000 Common stock 350,000 Property, plant, and equipment (net) 600,000 Retained earnings 226,000 $859,000 $859,000 At December 31, 2019, Valman discovered the following about EKC: No allowance for uncollectible accounts has been established. An allowance of $4,500 is considered appropriate. The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Valman. The FIFO inventory valuation of the December 31, 2019, ending inventory would be $204,000. The fair value of the property, plant, and equipment (net) is $720,000. The company has an unrecorded patent that is worth $100,000. The book values of the current liabilities and bonds payable are the same as their market values. Required: 1. Compute the value of the goodwill if Valman pays $1,350,500 for EKC. $ fill in the blank
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Valman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2019, is as follows:
| Cash | $54,000 | Current liabilities | $64,000 | |
| 65,000 | Bonds payable | 219,000 | ||
| Inventory | 140,000 | Common stock | 350,000 | |
| Property, plant, and equipment (net) | 600,000 | 226,000 | ||
| $859,000 | $859,000 |
At December 31, 2019, Valman discovered the following about EKC:
- No allowance for uncollectible accounts has been established. An allowance of $4,500 is considered appropriate.
- The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Valman. The FIFO
inventory valuation of the December 31, 2019, ending inventory would be $204,000. - The fair value of the property, plant, and equipment (net) is $720,000.
- The company has an unrecorded patent that is worth $100,000.
- The book values of the current liabilities and bonds payable are the same as their market values.
Required:
1. Compute the value of the goodwill if Valman pays $1,350,500 for EKC.
$ fill in the blank
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