Only answer part2 Legume Company is trying to decide whether or not to acquirePeanut Inc. The following balance sheet for Peanut Inc. providesinformation about book values. Estimated market values are alsolisted, based upon Legume Company's appraisals.Peanut Inc. Peanut Ic.Book Values Market ValuesCurrent assets$260,000 S 260,000Property, plant & equipment(net)650,000740,000Total assets$910,000 SI,000,000Total liabilities$400,000$ 400,000Common stock, $10 par value 160,000Retained earnings_350,000Total liabilities and equities$910,000Legume Company expects that Peanut will earn approximately$150,000 per year in net income over the next five years. Thisincome is higher than the 12% annual return on tangible assetsconsidered to be the industry "norm."Part 1:Compute an estimation of goodwill based on the informationabove that Legume might be willing to pay (include in itspurchase price), under each of the following independentscenarios:A. Legume is willing to pay for excess earnings for anexpected life of five years (undiscounted). What amountof goodwill would Pasion be willing to pay?B. Legume is willing to pay for excess earnings for anexpected life of five years, which should be capitalized atthe industry normal rate of return. What amount ofgoodwill would Pasion be willing to pay?C. Excess earnings are expected to last indefinitely, butLegume demands a higher rate of return of 20% becauseof the risk involved. What amount of goodwill wouldPasion be willing to pay?Part 2:Determine the amount of goodwill to be recorded on the booksif Legume pays $800,000 cash and assumes Peanut's liabilities.

Calculation of goodwill in Acqusition For Calculation of goodwill it taken consider the purchase…

information about book values. Estimated market values are also listed, based upon Legume Company's appraisals. Реaпu Inc. Peaпut Inc. Book Values Market Values Current assets $260,000 S 260,000 Property, plant & equipment 650,000 740,000 (пеt) Total assets $910,000 $1,000,000 Total liabilities $400,000 S 400,000 Common stock, S10 par value 160,000 Retained earnings Total liabilities and equities 350,000 $910,000 Legume Company expects that Peanut will earn approximately $150,000 per year in net income over the next five years. This income is higher than the 12% annual return on tangible assets considered to be the industry "norm." Part 1: Compute an estimation of goodwill based on the information

information about book values. Estimated market values are also listed, based upon Legume Company's appraisals. Реaпu Inc. Peaпut Inc. Book Values Market Values Current assets $260,000 S 260,000 Property, plant & equipment 650,000 740,000 (пеt) Total assets $910,000 $1,000,000 Total liabilities $400,000 S 400,000 Common stock, S10 par value 160,000 Retained earnings Total liabilities and equities 350,000 $910,000 Legume Company expects that Peanut will earn approximately $150,000 per year in net income over the next five years. This income is higher than the 12% annual return on tangible assets considered to be the industry "norm." Part 1: Compute an estimation of goodwill based on the information

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter12: Intangibles

Section: Chapter Questions

Problem 7P: Hamilton Companys balance sheet on January 1, 2019, was as follows: Korbel Company is considering...

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On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received $12,000,000 in net assets. In 2016, the market value of the goodwill obtained from Branta Corp. was valued at $4,000,000, but in 2017 it dropped to $2,000,000. Prepare the journal entry for the creation of goodwill and the entry to record any impairments to it in subsequent years.
Alpha Company used debentures with a par valueof $660,000 to acquire 100% of Zeta, on January 1, 2013. On that date the fair value of the debentures issued was $644,000. The following balance sheet data were reported by Zeta at the point of the acquisition: Historical Cost Fair Value Cash and Receivabled 80,000 75,000 Inventory 145,000 200,000 Land 75,000 75,000 Plant & Equipment 450,000 350,000 Less: Accumulated Depreciation -170,000 Total Assets 580,000 700,000 Accounts Payable 50,000 50,000 Common Stock 100,000 Additional Paid i n Capital 60,000 Retained Earnings 370,000 Total Liabilities & Equity 580,000 Prepare the entry to record the above transaction.
Glass Company is thinking about acquiring Plastic Company. Glass Company is considering two methods of accomplishing control and is wondering how the accounting treatment will differ under each method. Glass Company has estimated that the fair values of Plastic’s net assets are equal to their book values, except for the equipment, which is understated by $20,000.The following balance sheets have been prepared on the date of acquisition:Assets Glass PlasticCash . . . . . . . . . . . . . . . . . . . . . . . . . . . $540,000 $ 20,000Accounts receivable . . . . . . . . . . . . . . . 50,000 70,000Inventory . . . . . . . . . . . . . . . . . . . . . . . . 50,000 100,000Property, plant, and equipment (net) . . . 230,000 270,000Total assets. . . . . . . . . . . . . . . . . . . . . $870,000…
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The VV Company had these accounts at the time it was acquired by Bush Co.: Cash - P36,000; Accounts receivable - P457,000; Inventories - P120,000; Plant, property, and equipment - P696,400; and Accounts payable - P350,800. Bush Co. paid P1,400,000 for net assets of VV Company. It was determined that fair market values of inventories and plant, property, and equipment were P133,000 and P900,000, respectively. An assumed contingent liability arising from past events with a fair value amounting to P10,000 and such amount is considered a reliable measurement. Bush is the lessee of VV in an operating lease that is favorable for an amount of P50,000. In the books of Bush Co., this transaction resulted in: A. Goodwill recorded at P184,800 B. Goodwill is zero C. Goodwill recorded at P284,800 D. Goodwill recorded at P234,800