Reference no: EM132317492
Question
Jones Manufacturing Company decided to expand further by purchasing Smith Company. The balance sheet of Smith Company as of December 31, 2016 was as follows Smith Company
Balance Sheet
December 31, 2016
Assets Liabilities and Equities
Cash $ 210,000 Accounts payable $ 425,000
Receivables 350,000 Mortgage Payable 125,500
Allowance (1,500)
Supplies 6,500 Common stock 800,000
Inventory 375,000 Retained earnings 594,000
Plant assets 1,125,000
Accumulated Depr. (120,500)
Total assets $1,944,500 Total liab. & equities $1,944,500
An appraisal, agreed to by the parties, indicated that the fair market value of the inventory was $340,000 and that the fair market value of the plant assets was $1,150,000. A patent that Smith Company possessed was determined to have a value of $3,000.
The fair market value of the receivables is equal to the amount reported on the balance sheet. The agreed purchase price was $1,850,000, and this amount was paid in cash to the previous owners of Smith Company.
Instructions
Journalize the purchase of Smith Company by Jones Manufacturing showing the amount of goodwill.
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