Question

Marino Company had the following balance sheet on January 1, 2016:

Marino Company

Balance Sheet

January 1, 2016

1	Cash	$20,000.00	Accounts payable	$20,000.00
2	Inventory	30,000.00	Notes payable	100,000.00
3	Property, plant, and equipment	200,000.00
4	Patent	20,000.00	Shareholders’ equity	150,000.00
5		$270,000.00		$270,000.00

On January 1, 2016, Paul Company purchased Marino by acquiring all its outstanding shares for $300,000 cash. On that date, the fair value of the inventory was $20,000, and the fair value of the equipment was $250,000. In addition, the fair value of a previously unrecorded customer list was $25,000. For all other amounts, the book value of January 1, 2016, equaled fair value.

Required:

1.	Compute the goodwill associated with the purchase of Marino.
2.	Prepare the journal entry necessary on January 1, 2016, to record the acquisition of Marino. Additional Instructions

CHART OF ACCOUNTS

Marino Company

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Property, Plant & Equipment
189	Accumulated Depreciation
191	Patent
192	Customer List
194	Goodwill

	LIABILITIES
211	Accounts Payable
221	Notes Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare the journal entry to record the acquisition of Marino by Paul Company on January 1. Additional Instructions

PAGE 1

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8
9

Compute the goodwill associated with the purchase of Marino.

Answer 1