Question :
Stillman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2013, is as follows:
Cash $51,000
Current liabilities $55,000
Accounts receivable 71,000
Bonds payable 158,000
Inventory 120,000
Common stock 225,000
Property, plant, and equipment (net) 640,000
Retained earnings 444,000
$882,000 $882,000
At December 31, 2013, Stillman discovered the subsequent about EKC:
No allowance for uncollectible accounts has been established. An allowance of $5,200 is taken appropriate.
The LIFO inventory technique has been used. The FIFO inventory technique would be used if EKC were purchased by Stillman. The FIFO inventory valuation of the December 31, 2013, ending inventory would be $188,000.
The fair value of the property, equipment and plant (net) is $760,000.
The company has an unrecorded patent that is worth $100,000.
The book values of the existing liabilities and bonds payable are the same as their market values.
Required:
1. Evaluate the value of the goodwill if Stillman pays $1,361,800 for EKC.