1. Lion Company is considering the acquisition of Tiger Company, Inc. early in 2018. To assess the amount it might be willing to pay, Lion Company makes the following computations and assumptions.

1. Tiger Company incomes in the year of 2014 to 2017 were OMR 180,000, OMR 180,000, OMR 200,000, OMR 250,000 and total income of the years OMR 810,000 respectively. Lion Company believes that an average of these earnings represents a fair estimate of annual earnings for the indefinite future. Depreciation on Office buildings and Plant and equipment each year OMR 350,000 and 150,000. Extraordinary gain of the Company in the year of 2016 OMR 100,000 and Extraordinary loss of the Company in the year of 2018 OMR 350,000.
2. Lion Company has identifiable assets with a total fair value of OMR 25,000,000 and Creditors OMR 700,000 and Account payable OMR 200,000. The assets include office equipment with a fair value approximating book value, office building with a fair value 25% higher than book value and Vehicle with a fair value 50% higher than book value. The remaining lives of the assets are deemed to be approximately equal to those used by Lion Company.

Required:

The normal rate of return on the net assets is 20%. The company earns 25% return on its investment. Fair value of return on investment 30%. Calculate estimated goodwill.

2. Putin Company acquired the assets and assumed the liabilities of Joni Company on January 1, 2018, paying OMR 4,500,000 cash. Immediately prior to the acquisition, Joni Company's balance sheet was as follows:

BOOK VALUE FAIR VALUE

Accounts receivable 240,000 220,000

Inventory 290,000 320,000

Land 960,000 1,508,000

Buildings 1,020,000 1,392,000

Total 2,510,000 3,440,000

Accounts payable 270,000 270,000

Note payable 600,000 600,000

Common stock, $5 par 420,000

Other contributed capital 640,000

Retained earnings 580,000

Total 2,510,000

Required:

1. Prepare the journal entries on the books of Putin Company to record the purchase the assets and assumption of the liabilities of Joni Company assuming that the amount paid was OMR 900,000.
2. Repeat the requirement in (A) assuming that the amount paid was OMR 400,000 except cash.