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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.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F0077ec45-aeaa-4640-9340-8eb00977cfb7%2F5365a10f-14a9-4286-9d68-ccf75efd46ef%2Fstkqweg_processed.jpeg&w=3840&q=75)
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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