Question
Pastco acquired Windmill for $1,120,000 in cash and a $782,000 piece of land on July 1, 2018. Pastco paid more than what the net assets
Pastco acquired Windmill for $1,120,000 in cash and a $782,000 piece of land on July 1, 2018. Pastco paid more than what the net assets of Windmill amounted to. The management of Pastco explained this decision by pointing out that according to their research, Windmill had a number of strengths beyond the accounting numbers: devoted customers, reliable suppliers and loyal employees. At the time of acquisition, total assets and liabilities of Windmill amounted to $2,120,000 and $580,000, respectively. All its assets were fairly valued except for buildings which were recorded at $420,000 but had a fair value of $510,000.
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