During $20$X$4,$ the Pencil Corp. entered into negotiations to buy Stilo Company, finally agreeing on a final cash purchase price of $$534,000.$ Pencil will acquire all assets and liabilities of Stilo effective $31$ December $20$X$4,$ except for the existing cash balances of Stilo.

The $31$ December $20$X$4$ balance sheet prepared by Stilo is shown below in column $($a$),$ and the revised fair values added later by Pencil are shown in column $($b$).$

STILO COMPANY BALANCE SHEET

At $31$ December $20$X$4($a$)$ Book Values of Stilo Co$.($b$)$ Fair Values assigned by Pencil Corp.

Assets

Cash $ $50,000$ n$/$a

Accounts receivable $($net$)106,000$ $ $108,000$

Inventory $320,000180,000$

Property, plant, and equipment $($net$)618,000570,000$

Land $22,00080,000$

Franchise $($unamortized balance$)38,00042,000$

Total $$1,154,000$

Liabilities and shareholders$$ equity

Current liabilities $ $74,00074,000$

Bonds payable $400,000400,000$

Shareholders$$ equity $680,000$ n$/$a

Total $$1,154,000$

Required $(10$ Marks$)$:

$1.$ Compute the amount of goodwill purchased by Pencil.

$2.$ Give the entry for Pencil to record the purchase of Stilo.