Problem 7. Accounting for Goodwill (3.2.1 content area)

Bill Bob, owner of Bob Interiors, is negotiating for the purchase of UMPI Studios. The following balance sheet of UMPI is given in an abbreviated form as follows:

Bill Bob and UMPI agree that the Land is undervalued by $60,000 and the Equipment is overvalued by $15,000. UMPI agrees to sell the gallery to Bill Bob for $550,000.

Instructions:

7.1 Prepare the journal entry to record the purchase of UMPI Studios on Bobs books.