Accounting for Goodwill On January 1, 2009, Fishing Creek Company purchased Skull Valley Technologies for

$8,800,000 cash. The book value and fair value of Skull Valley’s assets as of the date of the acquisition are listed below.

In addition, Skull Valley had liabilities totaling $4,000,000 at the time of the acquisition.
Required:
1. At what amount will Skull Valley’s trademark be recorded on the books of Fishing Creek, the acquiring company?
2. How much goodwill will be recorded as part of this acquisition?
3. Interpretive Question: What was Skull Valley’s recorded stockholders’ equity immediately before the acquisition? Under what circumstances does stockholders’ equity yield a poor measure of the fair value of a company?

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Cash Accounts receivable Inventory Property, plant, and equipment Trademark Totals Book Value Market Value $ 100,000 $ 100,000 500,000 950,000 500,000 1,200,000 1,500,000 1,900,000 0 2,000,000 $3,050,000 $5,700,000