Question

Business Course Return to course # My Subscriptions eBook Question 3 Not complete Marked out of 2200 P Flag question Recording Goodwill upon Acquisition On January 1, 2020, the balance sheet of Napervile Company (a sole proprietorship) was as follows. Assets Liabilities Accounts receivable inet of allowance) $120.000 Current $76,000 Inventory 180,000 Noncurrent 160,000 $236.000 Plant and equipment niet of depreciation 400,000 Equity Land 60,000 Owners' equity 524,000 Total 5760,000 Total liabilities and owners' equity 5760,000 On January 1, 2020, Chicago Corporation purchased all of the assets and assumed all of the liabilities listed on the above balance sheet for $580,000 cash. The assets, on date of purchase, wer valued by Chicago Corporation as follows: accounts receivable (net). $100,000; inventory, $170,000 plant and equipment (net), 5400,000; and land, $90,000. In addition, Chicago Corporation estimated purchased intangible assets of $4,000 for customer list and $16,000 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 Napervile Company Account Name Dr. Accounts Receivable net) Inventory Plant and Equipment ne Land MacBook Air So 2. 9 5 6

Answer 1

Solution :

PM Date Computation of the amount of goodwill paid by Chicago Corp Amount ($) Particulars Accounts receivable Inventory Plant & Equipment Land Customer List Trade Names NET ASSETS CA) 100 000 170,000 400,000 90,000 4ooo 16,000 780,000 Current Liabilities 76,000 Non Current liabilities 160,000 NET LIABILITIES CB) 236,000 2. PURCHASE CONSIDERATION CA-B) Less: Cash Paid. : GOODWILL 544,000 580.000 36.000 In the books of Chicago Corporation, Journal Entry for Purchase of Naperville Company) Accounts Receivable. Alc-O. 100.000 Inventory All 170,000 Plamt f Equipment Ale 400000 Land AIC 90,000 Customer List Aic or 4,000 Trade Names Alc Art list 16,oola Goodwill Alc Dr.36,000 To Current Liabilities All 76,000 To Non-Current Liabilities Ale 160,000 To Cash Alc 580,000

C.Amortization Of Goodwill :

Goodwill can be ammortised for a maximum of ten years, hence the minimum amount of goodwill that can be ammortised this year is $3,600/-.

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