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The board of Directors of Pastrana, Inc. is negotiating the purchase of Burgos' Galleries. The balance sheet @ 12/31/2009 of Burgos' is presented below:

Assets Liabilities & Stockholder's Equity
Cash $ 70,000 Notes Payable $ 50,000
Land $ 100,000 Account Payable $ 300,000
Equipment $ 375,000 Total Liabilities $ 350,000
Intangible Assets $ 30,000 Common Stocks $ 200,000
Retained Earnings $ 25,000 $ 225,000
Total Assets $ 575,000 Total Liabilities & Stk's Ety $ 575,000

Additional Information:

1. Land is undervalued by $50,000.
2. Equipment is overvalued by $ 5,000.
3. Burgos' agrees to sell the business to Pastrana Co. for $380,000.

Required:

1. Prepare a presentation showing in good form the calculation of Goodwill in this transaction.

2. describe the rational for your calculations.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M945873

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