During 20X4, the Evergreen Corporation entered into negotiations to buy Pine Company. During December 20X4, a final cash purchase price of $ 267,000 was agreed on. Evergreen will acquire all assets and liabilities of Pine Company, except for the existing cash balances of Pine.

The 31 December 20X4 balance sheet prepared by Pine Company is shown below in column (a), and the revised market values added later by Evergreen Corporation are shown in column (b).

Required:

1. Compute the amount of goodwill purchased by Evergreen Corporation.

2. Give the entry for Evergreen Corporation to record the purchase of Pine Company.

Transcribed Image Text:

PINE COMPANY BALANCE SHEET (a) Book Values of Pine Co. (b) Market Values At 31 December 20x4 of Evergreen Corp. Assets Cash Accounts receivable (net) $ 20,000 58,000 160,000 309,000 11,000 19,000 $577,000 $ 54,000 90,000 285,000 40,000 21,000 Inventory Property, plant, and equipment (net) Land Franchise (unamortized balance) Total Liabilities and shareholders' equity Current liabilities $ 37,000 200,000 340,000 $577,000 37,000 200,000 Bonds payable Shareholders' equity - Total