Question

On January 1, 2020, Patriot Inc. acquires 100% of SoreLoser Corp.'s outstanding common stock by exchanging 80,000 shares of Patriot's $10 par value common voting stock. On January 1, 2020, Patriot's voting common stock had a market value of $60.00 per share. SoreLoser's balances on the acquisition date, just prior to acquisition are listed below. SORELOSER IS BEING DISSOLVED.

                                                                            BOOK             FAIR MARKET

                                                                            VALUE                  VALUE

CASH $ 125,000                 $ 125,000

ACCOUNTS RECEIVABLE 275,000                    275,000

INVENTORY 330,000                    360,000

LAND 400,000                    460,000

BUILDING (NET) 1,250,000                1,500,000  

EQUIPMENT (NET) 1,620,000                1,475,000

ACCOUNTS PAYABLE (250,000)                (250,000)

COMMON STOCK, $1 PAR (1,000,000)             

ADDITIONAL PAID IN CAPITAL(1,500,000)

RETAINED EARNINGS, 1/1/2020(1,250,000)                 

Required:
Compute the value of the Goodwill account on the date of acquisition, 1/1/2020.

RECORD THE JOURNAL ENTRY FOR THE ACQUISITION OF INVESTMENT ON PATRIOT'S BOOKS

Answer 1

1.)	Net Identifiable asset
		Amount $
	CASH	125,000
	ACCOUNTS RECEIVABLE	275,000
	INVENTORY	360,000
	LAND	460,000
	BUILDING (NET)	1,500,000
	EQUIPMENT (NET)	1,475,000
	ACCOUNTS PAYABLE	-250,000
	Net Identifiable asset	3,945,000
	Purchase consideration	4,800,000	(80,000 x 60 )
	Less: Net Identifiable Asset	3,945,000
	Goodwill	$ 855,000
2.)	Account Titles	Debit $	Credit $
	CASH	125,000
	ACCOUNTS RECEIVABLE	275,000
	INVENTORY	360,000
	LAND	460,000
	BUILDING (NET)	1,500,000
	EQUIPMENT (NET)	1,475,000
	GOODWILL	855,000
	ACCOUNTS PAYABLE		250,000
	COMMON STOCK ( 80,000 x 10 )		800,000
	ADDITIONAL PAID IN CAPITAL		4,000,000
	( 80,000 x 50 )