Pip’s Paw Patrol had the following account Balances on Dec 31, 2021: BOOK Value FMV Current Assets $225,000 $250,000 Land $320,000 $350,000 Building $450,000 $650,000 Accum Dep ($50,000) Equipment $195,000 $50,000 Accum Dep ($100,000) Current Liabilities ($75,000) ($75,000) Bonds Payable ($200,000) ($300,000) Common Stock ($65,000) Paid in Capital ($700,000) Pip’s industry anticipates an 8% return on investments of P/E/P before accumulated depreciation and Pip generated a $120,000 profit in 2021. Pip would like to be paid for 4 years of excess earnings. REQUIRED: a. Calculate the Goodwill b. Calculate the price c. Record the purchase of the Pip Paw Patrol on the books of the BUYER, assume they issued 100,000 shares of $2 par value common stock and paid $40,000 in legal and accounting fees and $50,000 in stock issuance costs to their broker.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Pip’s Paw Patrol had the following account Balances on Dec 31, 2021:
BOOK Value FMV
Current Assets $225,000 $250,000
Land $320,000 $350,000
Building $450,000 $650,000
Accum Dep ($50,000)
Equipment $195,000 $50,000
Accum Dep ($100,000)
Current Liabilities ($75,000) ($75,000)
Bonds Payable ($200,000) ($300,000)
Common Stock ($65,000)
Paid in Capital ($700,000)
Pip’s industry anticipates an 8% return on investments of P/E/P before accumulated depreciation and
Pip generated a $120,000 profit in 2021. Pip would like to be paid for 4 years of excess earnings.
REQUIRED:
a. Calculate the Goodwill
b. Calculate the price
c. Record the purchase of the Pip Paw Patrol on the books of the BUYER, assume they issued
100,000 shares of $2 par value common stock and paid $40,000 in legal and accounting fees and
$50,000 in stock issuance costs to their broker.
d. Record the sale of the company on the books of the seller.

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