Pleasantville Company had the following balance sheet on January 1.

Pleasantville Company

Balance Sheet

January 1

1	Cash	$175,000.00	Accounts Payable	$57,000.00
2	Inventory	157,000.00	Notes Payable	250,000.00
3	Property, Plant, and Equipment	200,000.00	Mortgage Payable	150,000.00
4	Patent	25,000.00	Retained Earnings	100,000.00
5		$557,000.00		$557,000.00

On January 2, Carrs Company came to an agreement to purchase Pleasantville by acquiring all of its outstanding shares for $575,000 in cash. On that date in time, the fair value of their inventory was $150,000, and the fair value of the equipment was $225,000. The book value equals the fair value for all other accounts listed.

Required:

1.	Compute the goodwill associated with the purchase of Pleasantville.
2.	Prepare the journal entry necessary at January 2, to record the acquisition of Pleasantville.

CHART OF ACCOUNTS

Pleasantville Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Property, Plant, and Equipment
189	Accumulated Depreciation
191	Patent
194	Goodwill

	LIABILITIES
211	Accounts Payable
221	Notes Payable
231	Salaries Payable
250	Unearned Revenue
261	Mortgage 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 Expense
910	Income Tax Expense

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

2. Prepare the journal entry necessary at January 2, to record the acquisition of Pleasantville.

General Journal Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
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Which of the following statements concerning intangibles is true?

The registration of a trademark or trade name lasts for 20 years and is nonrenewable.

Organization costs must be expensed as incurred.

A patent should be amortized over the shorter of the inventor's life or its economic life.

A copyright should be considered an intangible with an indefinite life.