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

At December 31, 2019, Elm discovered the following about EKC:
a. No allowance for uncollectible accounts has been established. An allowance of $5,000 is considered appropriate.
b. The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Elm. The FIFO inventory valuation of the December 31, 2019, ending inventory would be $180,000.
c. The fair value of the property, plant, and equipment (net) is $730,000.
d. The company has an unrecorded patent that is worth $120,000.
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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Current liabilities Bonds payable Common stock Retained earnings Cash Accounts receivable $ 60,000 $ 50,000 70,000 120,000 600,000 $840,000 200,000 300,000 280,000 $840,000 Inventory Property, plant, and equipment (net)