Goodwill

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

Cash	$54,000		Current liabilities	$50,000
Accounts receivable	71,000		Bonds payable	189,000
Inventory	100,000		Common stock	340,000
Property, plant, and equipment (net)	640,000		Retained earnings	286,000
	$865,000			$865,000

At December 31, 2019, Stillman discovered the following about EKC:

No allowance for uncollectible accounts has been established. An allowance of $5,800 is considered appropriate.

The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Stillman. The FIFO inventory valuation of the December 31, 2019, ending inventory would be $151,000.

The fair value of the property, plant, and equipment (net) is $750,000.

The company has an unrecorded patent that is worth $100,000.

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 Stillman pays $1,356,200 for EKC.

$ fill in the blank 1

2. Next Level Why would the book value of a company's identifiable net assets differ from its market value?

Acquirer paid too much.Assets listed on the balance sheet at amounts different from their market value.Identifiable intangible assets may be unrecorded or undervalued.All of the choices are correct.