Taste-T Company has been in business for 30 years and has developed a large group of loyal restaurant customers. Down Home Foods made an offer to buy Taste-T Company for $7,200,000. The market value of Taste-T’s tangible assets, net of liabilities, on the date of the offer is $6,200,000. Taste-T also holds a patent for a fluting machine that the company invented (the patent with a market value of $500,000 was never recorded by Taste-T because it was developed internally).
1. How much has Down Home Foods included for intangibles in its offer of $7,200,000?
2. Assuming Taste-T accepts this offer, which company will report Goodwill on its balance sheet and at what amount?