Abe Manufacturing Corp. decided to expand further by purchasing thenet assets of ERB Manufacturing Corp. ERB's statement of financialposition at December 31, 2023 follows.AssetsReceivablesInventoryPlant assets (net)Total assetsERB MANUFACTURING CORP.Statement of Financial PositionDecember 31, 2023Cash450,000275,0001,025,000$1,960,000$ 210,000Liabilities and EquitiesAccounts payable$ 325,000Common shares800,000Retained earnings835,000Total liabilities and equities$1,960,000An appraisal, agreed to by both parties, indicated that the fair value ofthe inventory was $320,000 and the fair value of the plant assets was$1,225,000. The fair value of the receivables and payables is equal to theamount reported on the balance sheet. The agreed purchase price was$3 million, and this amount was paid in cash to the owners of ERB.InstructionsCalculate the amount of goodwill (if any) implied in the purchase price of$3 million. Show calculations.

Goodwill is the difference between consideration paid and net assets at fair value.

Abe Manufacturing Corp. decided to expand further by purchasing the net assets of ERB Manufacturing Corp. ERB's statement of financial position at December 31, 2023 follows. Assets Receivables Inventory Plant assets (net) Total arretr ERB MANUFACTURING CORP. Statement of Financial Position December 31, 2023 Cash 450,000 275,000 1,025,000 $1.960.000 $ 210,000

Abe Manufacturing Corp. decided to expand further by purchasing the net assets of ERB Manufacturing Corp. ERB's statement of financial position at December 31, 2023 follows. Assets Receivables Inventory Plant assets (net) Total arretr ERB MANUFACTURING CORP. Statement of Financial Position December 31, 2023 Cash 450,000 275,000 1,025,000 $1.960.000 $ 210,000

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 98.3C

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