Question
Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable (net
Recording Goodwill upon Acquisition
On January 1, 2020, the balance sheet of Naperville Company (a sole proprietorship) was as follows.
Assets | Liabilities | |||
Accounts receivable (net of allowance) | 48,000 | Current | $30,400 | |
Inventory | 72,000 | Noncurrent | 64,000 | $94,400 |
Plant and equipment (net of depreciation) | 160,000 | Equity | ||
Land | 24,000 | Owners equity | 209,600 | |
Total | $304,000 | Total liabilities and owners equity | $304,000 |
On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $232,000 cash. The assets, on date of purchase, were valued by Chicago Corporation as follows: accounts receivable (net), $40,000; inventory, $68,000; plant and equipment (net), $160,000; and land, $36,000. In addition, Chicago Corporation estimated purchased intangible assets of $1,600 for customer list and $6,400 for trade names (both previously unrecorded). The liabilities were valued at their carrying amounts.
Required
a. Compute the amount of goodwill included in the purchase price paid by Chicago Corporation.
b. Provide the entry that Chicago Corporation should make to record the purchase of Naperville Company.
Account Name | Dr. | Cr. |
---|---|---|
Accounts Receivable (net) | ||
Inventory | ||
Plant and Equipment (net) | ||
Land | ||
Intangible AssetCustomer List | ||
Intangible AssetTrade names | ||
Goodwill | ||
Current Liabilities | ||
Noncurrent Liabilities | ||
Cash |
c. What is the minimum amount of goodwill that Chicago Corporation can amortize at the end of 2020?
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