Reference no: EM132471815

Goodwill

 Stillman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2019, is as follows:

 Cash                                           $45,000

Current liabilities                             $65,000

Accounts receivable                           73,000

Bonds payable                                   211,000

Inventory                                           140,000

Common stock                                      225,000

Property, plant, and equipment (net)        570,000

Retained earnings                        327,000 $828,000 $828,000

At December 31, 2019, Stillman discovered the following about EKC:

Point 1: No allowance for uncollectible accounts has been established. An allowance of $5,400 is considered appropriate.

Point 2: The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Stillman. The FIFO inventory valuation of the December 31, 2019, ending inventory would be $190,000.

Point 3: The fair value of the property, plant, and equipment (net) is $690,000.

Point 4: The company has an unrecorded patent that is worth $100,000.

Point 5: The book values of the current liabilities and bonds payable are the same as their market values.

Required:

Question 1. Compute the value of the goodwill if Stillman pays $1,296,600 for EKC.