Question

i need help computing the value of the goodwill.

Goodwill Maple Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2019, is as follows: Cash . $45,000 Current liabilities $50,000 Accounts receivable 77,000 Bonds payable 181,000 Inventory 100,000 Common stock 215,000 Property, plant, and equipment (net) 600,000 Retained earnings 376,000 $822,000 $822,000 At December 31, 2019, Maple discovered the following about EKC: a. No allowance for uncollectible accounts has been established. An allowance of $5,300 is considered appropriate. b. The LIFO Inventory method has been used. The FIFO Inventory method would be used if EKC were purchased by Maple. The FIFO Inventory valuation of the December 31, 2019, ending inventory would be $164,000. c. The fair value of the property, plant, and equipment (net) is $750,000 d. The company has an unrecorded patent that is worth $100,000 e. 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 I Maple pays $1,334,700 for EKC. $ 1,026,000 x 2. Next Level Why would the book value of a company's identifiable net assets differ from its market value? All of the choices are correct.

Answer 1

Answer- Pvalue of goodwill I purchase Consideration - Fair value of net Assets calculation of value of Net Assels - Amount Amount particulars Assets cash 45,000 Accounts Receivable $77000 Less Allowance (4 5300) $71,700 $164,000 Inventory (as per FIFO method) $750,000 property, plant & Equipment (Net) au recorded palent $100,000 $1130700 Total Assels Less! Liabililies $ 50,000 current Liabihlies Bouds payable $181,000 ($231,000) Net Assets $899,700 Given purchase consideration = $1,334,700 Goodwill = $1,334,700 - $ 899,700 - $435.000 4. The value of good will is $435,000 2) various resous for book value of company's identifiable net Assets difter from is Market value. • Identifiable net asset like proparty plant and equipment - are generally recorded." • There might different accouwing policies followed for some asset like inventory company may not have the policy of creating allowance for certain assetslike. - Accounts receivable. " Some accounting policy may not allow the recognition of self generated intaugable asset like patent and dood will.