The fair market value of Carl Company's net identifiable assets is $4,000,000. Rita Corporation purchases Carl's entire business for $4,700,000. Which of the following statements is NOT correct?

1. Rita Corporation paid $700,000 for goodwill generated by Carl Company.
2. Rita feels that Carl Company has the ability to generate earnings in excess of a normal return on net identifiable assets.
3. Rita will record amortization expense over a period not to exceed 40 years.
4. Rita Corporation will record $700,000 to goodwill, an intangible asset, which will be reported in its balance sheet