Goodwill

Elm Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is as follows:

Cash	$ 50,000		Current liabilities	$ 60,000
Accounts receivable	70,000		Bonds payable	200,000
Inventory	120,000		Common stock	300,000
Property, plant, and equipment (net)	600,000		Retained earnings	280,000
	$840,000			$840,000

At December 31, 2016, Elm discovered the following about EKC:

No allowance for uncollectible accounts has been established. An allowance of $5,000 is considered appropriate.

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, 2016, ending inventory would be $180,000.

The fair value of the property, plant, and equipment (net) is $730,000.

The company has an unrecorded patent that is worth $120,000.

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.