Question Content Area

Goodwill

Corman Company is considering purchasing EKC Company. EKC's balance sheet at December $31,2019,$ is as follows:

Cash $$53,000$ Current liabilities $$51,000$

Accounts receivable $69,000$ Bonds payable $205,000$

Inventory $130,000$ Common stock $260,000$

Property, plant, and equipment $($net$)600,000$ Retained earnings $336,000$

$$852,000$ $$852,000$

At December $31,2019,$ Corman discovered the following about EKC:

No allowance for uncollectible accounts has been established. An allowance of $$4,100$ is considered appropriate.

The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Corman. The FIFO inventory valuation of the December $31,2019,$ ending inventory would be $$193,000.$

The fair value of the property, plant, and equipment $($net$)$ is $$730,000.$

The company has an unrecorded patent that is worth $$100,000.$

The book values of the current liabilities and bonds payable are the same as their market values.

Required:

$1.$ Compute the value of the goodwill if Corman pays $$1,354,900$ for EKC.

$ fill in the blank $1$

$2.$ Next Level Why would the book value of a company's identifiable net assets differ from its market value?