Abe Manufacturing Corp. decided to expand further by purchasing the net assets of ERB Manufacturing Corp. ERB's statement of financial position at December 31, 2023 follows. Assets Receivables Inventory Plant assets (net) Total arretr ERB MANUFACTURING CORP. Statement of Financial Position December 31, 2023 Cash 450,000 275,000 1,025,000 $1.960.000 $ 210,000
Abe Manufacturing Corp. decided to expand further by purchasing the net assets of ERB Manufacturing Corp. ERB's statement of financial position at December 31, 2023 follows. Assets Receivables Inventory Plant assets (net) Total arretr ERB MANUFACTURING CORP. Statement of Financial Position December 31, 2023 Cash 450,000 275,000 1,025,000 $1.960.000 $ 210,000
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
ChapterA2: Investments
Section: Chapter Questions
Problem 25E
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Transcribed Image Text:Abe Manufacturing Corp. decided to expand further by purchasing the
net assets of ERB Manufacturing Corp. ERB's statement of financial
position at December 31, 2023 follows.
Assets
Receivables
Inventory
Plant assets (net)
Total assets
ERB MANUFACTURING CORP.
Statement of Financial Position
December 31, 2023
Cash
450,000
275,000
1,025,000
$1,960,000
$ 210,000
Liabilities and Equities
Accounts payable
$ 325,000
Common shares
800,000
Retained earnings
835,000
Total liabilities and equities
$1,960,000
An appraisal, agreed to by both parties, indicated that the fair value of
the inventory was $320,000 and the fair value of the plant assets was
$1,225,000. The fair value of the receivables and payables is equal to the
amount reported on the balance sheet. The agreed purchase price was
$3 million, and this amount was paid in cash to the owners of ERB.
Instructions
Calculate the amount of goodwill (if any) implied in the purchase price of
$3 million. Show calculations.
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