Pip’s Paw Patrol had the following account Balances on Dec 31, 2021:
BOOK Value FMV
Current Assets $225,000 $250,000
Land $320,000 $350,000
Building $450,000 $650,000
Accum Dep ($50,000)
Equipment $195,000 $50,000
Accum Dep ($100,000)
Current Liabilities ($75,000) ($75,000)
Bonds Payable ($200,000) ($300,000)
Common Stock ($65,000)
Paid in Capital ($700,000)
Pip’s industry anticipates an 8% return on investments of P/E/P before accumulated depreciation and
Pip generated a $120,000 profit in 2021. Pip would like to be paid for 4 years of excess earnings.
REQUIRED:
a. Calculate the Goodwill
b. Calculate the price
c. Record the purchase of the Pip Paw Patrol on the books of the BUYER, assume they issued 100,000 shares of $2 par value common stock and paid $40,000 in legal and accounting fees and $50,000 in stock issuance costs to their broker.
d. Record the sale of the company on the books of the seller