Intermediate Accounting: Reporting And Analysis
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Chapter 12, Problem 17E

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

Chapter 12, Problem 17E, Company is considering purchasing EKC Company. EKCs balance sheet at December 31, 2019, is as

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

  1. a. No allowance for uncollectible accounts has been established. An allowance of $5,000 is considered appropriate.
  2. b. The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Elm. The FIFO inventors-valuation of the December 31, 2019, ending inventors-would be $180,000.
  3. c. The fair value of the property, plant, and equipment (net) is $730,000.
  4. d. The company has an unrecorded patent that is worth $120,000.
  5. 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 if Elm pays $1,350,000 for EKC.

2. Next Level Why would the book value of a company’s identifiable net assets differ from its market value?

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Chapter 12 Solutions

Intermediate Accounting: Reporting And Analysis

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