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FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
[The following information applies to the questions displayed below]
The notes to a recent annual report from Suzie's Shoe Corporation indicated that the company acquired another company,
Steve's Shoes, Incorporated,
Assume that Suzie's acquired Steve's Shoes on January 5 of the current year. Suzie's acquired the name of the company
and all of its assets for $504,000 cash, Suzie's did not assume the liabilities. The transaction was closed on January 5 of
the current year, at which time the balance sheet of Steve's Shoes reflected the following book values. An independent
appraiser estimated the following market values for the assets.
January 5 of the Current Year
Accounts receivable (net)
Inventory
Fixed assets (net)
Other assets
Total assets
Steve's Shoes, Incorporated
Liabilities
Stockholders equity
Total liabilities and stockholders' equity
Goodwill
Book Value
$37,000
223,000
28,000
10,000
$298,000
$60,000
238,000
$298,000
Market Value
$37,000
183,000
49,000
14,000
Required:
1. Compute the amount of goodwill resulting from the purchase. (Hint: Assets are purchased at market value in conformity with the
cost principle.)
Transcribed Image Text:Required information [The following information applies to the questions displayed below] The notes to a recent annual report from Suzie's Shoe Corporation indicated that the company acquired another company, Steve's Shoes, Incorporated, Assume that Suzie's acquired Steve's Shoes on January 5 of the current year. Suzie's acquired the name of the company and all of its assets for $504,000 cash, Suzie's did not assume the liabilities. The transaction was closed on January 5 of the current year, at which time the balance sheet of Steve's Shoes reflected the following book values. An independent appraiser estimated the following market values for the assets. January 5 of the Current Year Accounts receivable (net) Inventory Fixed assets (net) Other assets Total assets Steve's Shoes, Incorporated Liabilities Stockholders equity Total liabilities and stockholders' equity Goodwill Book Value $37,000 223,000 28,000 10,000 $298,000 $60,000 238,000 $298,000 Market Value $37,000 183,000 49,000 14,000 Required: 1. Compute the amount of goodwill resulting from the purchase. (Hint: Assets are purchased at market value in conformity with the cost principle.)
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