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Marino Company had the following balance sheet on January 1, 2019: Marino Company Balance Sheet January 1, 2019 1 Cash $20,000.00 Accounts payable $20,000.00 2

Marino Company had the following balance sheet on January 1, 2019:

Marino Company

Balance Sheet

January 1, 2019

1

Cash

$20,000.00

Accounts payable

$20,000.00

2

Inventory

30,000.00

Notes payable

100,000.00

3

Property, plant, and equipment

200,000.00

4

Patent

30,000.00

Shareholders equity

160,000.00

5

$280,000.00

$280,000.00

On January 1, 2019, Paul Company purchased Marino by acquiring all its outstanding shares for $300,000 cash. On that date, the fair value of the inventory was $20,000, and the fair value of the equipment was $250,000. In addition, the fair value of a previously unrecorded customer list was $25,000. For all other amounts, the book value of January 1, 2019, equaled fair value.

Required:

1. Compute the goodwill associated with the purchase of Marino.
2. Prepare the journal entry necessary on January 1, 2019, 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

1. Compute the goodwill associated with the purchase of Marino.

______________________

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

8

9

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