Example 10-3:

Suppose Big K purchased 8,000 shares (100 percent of shares outstanding) of Little K paying $10,000 in cash and issuing (and distributing to Little Ks shareholders) 5,000 shares with par value of $1 and total market value of $41,200.

The fair value of Little Ks identifiable assets/liabilities are as follows:

Cash $6,000 Accounts Payable 15,000

Accounts Receivable 9,000 Long-term Notes Payable 17,000

Inventory 8,000

Equipment 45,000

Whats the amount of goodwill Big K should recognize?

Whats the journal entry?