please calculate the goodwill and include qualitative discussions to support all calculations

No information regarding rate provided.

StatementsofFinancialPosition AnatDonomhom21onv12 Velo will acquire eighty-five per cent (85%) of the shares of Merdin by paying the following: - Cash of $200,000. - A loan from a German investor to be repaid in blended payments of $300,000 at the end of each of the next three years. Each of the three founding friends will retain a 5% interest in Merdin. The existing corporate structure of two separate legal entities will be maintained. Contingent Consideration The acquisition price will be increased by an amount equal to 40% of the amount the sales of "Crank X" exceed $500,000 for each of the two years immediately following the acquisition. Velo management has provided the following estimates to you: The offer is based on a valuation completed as part of the due diligence review that suggested the fair value of Merdin is approximately $1,200,000. Other Information Gathered - Both Merdin and Velo use the cost model to account for property, plant and equipment. - The property, plant and equipment of Merdin is being depreciated on a straight-line basis as follows: - Machinery and equipment: - Over a ten year life that commenced January 1, 20X05 - Velo estimates the machinery and equipment will have a further six year life at December 31, 20X13 - The patent is being amortized on a straight-line basis and has a remaining useful life of five years at December 31,20X13. - Based on preliminary estimates, the appraised values of Merdin's machinery and equipment are: - The tax values for all assets and liabilities of Velo and Merdin are equal to their carrying values on December 31,2013. - Merdin owns the rights to a patent it developed to produce "Crank-X". Merdin has capitalized only the costs of registering the patent. Velo's management believes this patent has value as the International Cycling Union is expected to approve the crank for the upcoming cycling season and as a result of positive feedback received from professional cyclists. According to Mike, net expected cash flows from this patent are estimated to be $50,000 per year for a minimum of five years. Mike has provided net expected cash flows for five years only as the technology in the cycling industry is changing rapidly. - No staff reductions are anticipated as a result of the proposed acquisition. Other Information Gathered Many cycling organizations and retail outlets organize group rides. Group rides operate from Merdin's premises three times per week from April to October. Usually one or more of the owners participate in the group rides. Group rides consist of cyclists of similar levels of ability meeting at Merdin's premises. The riders select a route and ride that route together. The riders enjoy the companionship as well as the competitive nature of the rides. The owners have found this is a great method to market their products. In August 20X13, while on one of these group rides, a rider was struck by a car. Even though the rider had signed a waiver of responsibility, the rider's family is suing Merdin for $800,000. Merdin's management does not believe payment is probable and, as a result, has not set up a provision for this in its financial statements. Legal counsel agrees with management and has suggested there is a 60% chance Merdin will not be held liable. However, legal counsel does suggest there is a 30% chance Merdin will have to pay $200,000 and a 10% chance Merdin will have to pay $400,000. Innomo tov rotac for tha twin onmnaniac aro ac follorra StatementsofFinancialPosition AnatDonomhom21onv12 Velo will acquire eighty-five per cent (85%) of the shares of Merdin by paying the following: - Cash of $200,000. - A loan from a German investor to be repaid in blended payments of $300,000 at the end of each of the next three years. Each of the three founding friends will retain a 5% interest in Merdin. The existing corporate structure of two separate legal entities will be maintained. Contingent Consideration The acquisition price will be increased by an amount equal to 40% of the amount the sales of "Crank X" exceed $500,000 for each of the two years immediately following the acquisition. Velo management has provided the following estimates to you: The offer is based on a valuation completed as part of the due diligence review that suggested the fair value of Merdin is approximately $1,200,000. Other Information Gathered - Both Merdin and Velo use the cost model to account for property, plant and equipment. - The property, plant and equipment of Merdin is being depreciated on a straight-line basis as follows: - Machinery and equipment: - Over a ten year life that commenced January 1, 20X05 - Velo estimates the machinery and equipment will have a further six year life at December 31, 20X13 - The patent is being amortized on a straight-line basis and has a remaining useful life of five years at December 31,20X13. - Based on preliminary estimates, the appraised values of Merdin's machinery and equipment are: - The tax values for all assets and liabilities of Velo and Merdin are equal to their carrying values on December 31,2013. - Merdin owns the rights to a patent it developed to produce "Crank-X". Merdin has capitalized only the costs of registering the patent. Velo's management believes this patent has value as the International Cycling Union is expected to approve the crank for the upcoming cycling season and as a result of positive feedback received from professional cyclists. According to Mike, net expected cash flows from this patent are estimated to be $50,000 per year for a minimum of five years. Mike has provided net expected cash flows for five years only as the technology in the cycling industry is changing rapidly. - No staff reductions are anticipated as a result of the proposed acquisition. Other Information Gathered Many cycling organizations and retail outlets organize group rides. Group rides operate from Merdin's premises three times per week from April to October. Usually one or more of the owners participate in the group rides. Group rides consist of cyclists of similar levels of ability meeting at Merdin's premises. The riders select a route and ride that route together. The riders enjoy the companionship as well as the competitive nature of the rides. The owners have found this is a great method to market their products. In August 20X13, while on one of these group rides, a rider was struck by a car. Even though the rider had signed a waiver of responsibility, the rider's family is suing Merdin for $800,000. Merdin's management does not believe payment is probable and, as a result, has not set up a provision for this in its financial statements. Legal counsel agrees with management and has suggested there is a 60% chance Merdin will not be held liable. However, legal counsel does suggest there is a 30% chance Merdin will have to pay $200,000 and a 10% chance Merdin will have to pay $400,000. Innomo tov rotac for tha twin onmnaniac aro ac follorra