Question

Michael Moss, owner of Moss Interiors, is negotiating for the purchase of Ivanhoe Galleries. The balance sheet of Ivanhoe is given in an abbreviated form below.

Ivanhoe Gallaries Balance Sheet As of December 31, 2020
Assets				Liabilities and Stockholders’ Equity
Cash		$103,000		Accounts payable				$50,200
Land		69,800		Notes payable (long-term)				304,300
Buildings (net)		199,800		Total liabilities				354,500
Equipment (net)		174,800		Common stock		$200,500
Copyrights (net)		29,800		Retained earnings		22,200		222,700
Total assets		$577,200		Total liabilities and stockholders’ equity				$577,200

Moss and Ivanhoe agree that:

1.		Land is undervalued by $30,000.
2.		Equipment is overvalued by $5,000.

Ivanhoe agrees to sell the gallery to Moss for $350,000.

Prepare the entry to record the purchase of Ivanhoe Galleries on Moss’s books.

The goodwill came out to be $102,300 in the journal entry. How did they get this number?

Answer 1

Answer Account Titles and Explanation Debit Credit $103,000 Cash Land ($69,800+ $30,000) Buildings Equipment ($174,800 $5,000) Copyrights Goodwill $99,800 $199,800 $169,800 $29,800 $102,300 Accounts Payable $50,200 $304,300 Long-term Note Payable $350,000 Cash (To record the Purchases) Explanations Calculation of Goodwill Goodwill [($50,200 $304,300+$350,000) ($103,000+ $99,800 + $199,800 $169,800 $29,800 $102,300)] =$704,500- $602,200 =$102,300