Question :

Stillman Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2013, is as follows:

Cash $51,000               

Current liabilities   $55,000

Accounts receivable 71,000 

Bonds payable 158,000

Inventory 120,000

Common stock 225,000

Property, plant, and equipment (net) 640,000

Retained earnings 444,000

$882,000              $882,000

At December 31, 2013, Stillman discovered the subsequent about EKC:

No allowance for uncollectible accounts has been established. An allowance of $5,200 is taken appropriate.

The LIFO inventory technique has been used. The FIFO inventory technique would be used if EKC were purchased by Stillman. The FIFO inventory valuation of the December 31, 2013, ending inventory would be $188,000.

The fair value of the property, equipment and plant (net) is $760,000.

The company has an unrecorded patent that is worth $100,000.

The book values of the existing liabilities and bonds payable are the same as their market values.

Required:

1. Evaluate the value of the goodwill if Stillman pays $1,361,800 for EKC.