1. Adam Company is looking to purchase the Hodges Company for $150,000 cash. The fair value of their equipment is $35,600, the fair value of their inventory is $20,000, their accounts receivable fair value is $24,500, and they have an unrecorded patent of $15,000. All other book values are equal fair value as of January 1, 2015.

Cash $17,500 Accounts Payable $5,700

Accounts Receivable 35,000 Notes Payable 22,500

Inventory 15,700

Property, Plant and equip 25,000 Retained Earnings 35,000

$93,200 $93,200

Required:

1. Compute the goodwill associated with the purchase of Hodges.

2. Prepare the Journal entry necessary at January 1, 2015 to record the purchase.

3. What if the purchase was $69,000 would any goodwill be reported?