Valman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2013, is as follows:
| Cash |
$56,000 |
|
Current liabilities |
$64,000 |
| Accounts receivable |
74,000 |
|
Bonds payable |
214,000 |
| Inventory |
100,000 |
|
Common stock |
250,000 |
| Property, plant, and equipment (net) |
560,000 |
|
Retained earnings |
262,000 |
|
$790,000 |
|
|
$790,000 |
At December 31, 2013, Valman discovered the following about EKC:
- No allowance for uncollectible accounts has been established. An allowance of $4,000 is considered appropriate.
- The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Valman. The FIFO inventory valuation of the December 31, 2013, ending inventory would be $166,000.
- The fair value of the property, plant, and equipment (net) is $680,000.
- The company has an unrecorded patent that is worth $100,000.
- The book values of the current liabilities and bonds payable are the same as their market values.
Required:
1. Compute the value of the goodwill if Valman pays $1,244,000 for EKC.
$