Question
Marino Company Balance Sheet January 1, 2016 1 Cash $10,000.00 Accounts payable $30,000.00 2 Inventory 40,000.00 Notes payable 100,000.00 3 Property, plant, and equipment 200,000.00
Marino Company |
Balance Sheet |
January 1, 2016 |
1 | Cash | $10,000.00 | Accounts payable | $30,000.00 |
2 | Inventory | 40,000.00 | Notes payable | 100,000.00 |
3 | Property, plant, and equipment | 200,000.00 |
|
|
4 | Patent | 20,000.00 | Shareholders equity | 140,000.00 |
5 |
| $270,000.00 |
| $270,000.00 |
On January 1, 2016, Paul Company purchased Marino by acquiring all its outstanding shares for $300,000 cash. On that date, the fair value of the inventory was $30,000, and the fair value of the equipment was $240,000. In addition, the fair value of a previously unrecorded customer list was $25,000. For all other amounts, the book value of January 1, 2016, equaled fair value.
Required:
1. | Compute the goodwill associated with the purchase of Marino. |
2. | Prepare the journal entry necessary on January 1, 2016, to record the acquisition of Marino. |
CHART OF ACCOUNTSMarino CompanyGeneral Ledger
ASSETS | |
111 | Cash |
121 | Accounts Receivable |
141 | Inventory |
152 | Prepaid Insurance |
181 | Property, Plant & Equipment |
189 | Accumulated Depreciation |
191 | Patent |
192 | Customer List |
194 | Goodwill |
LIABILITIES | |
211 | Accounts Payable |
221 | Notes Payable |
231 | Salaries Payable |
250 | Unearned Revenue |
261 | Income Taxes Payable |
EQUITY | |
311 | Common Stock |
331 | Retained Earnings |
REVENUE | |
411 | Sales Revenue |
EXPENSES | |
500 | Cost of Goods Sold |
511 | Insurance Expense |
512 | Utilities Expense |
521 | Salaries Expense |
532 | Bad Debt Expense |
540 | Interest Expense |
541 | Depreciation Expense |
559 | Miscellaneous Expenses |
910 | Income Tax Expense
3. Compute the goodwill associated with the purchase of Marino. |
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