Acquisition of Tangible and Intangible Assets

question 62

Essay

Acquisition of tangible and intangible assets
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, 2020 follows.
An appraisal, agreed to by both parties, indicated that the fair value of the 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 the amount reported on the balance sheet. The agreed purchase price was $ 3 million, and this amount was paid in cash to the owners of ERB
Instructions
Calculate the amount of goodwill (if any) implied in the purchase price of $ 3 million. Show calculations.

---

Definitions:

Buying Habits

Patterns or tendencies that consumers show when purchasing goods and services, often analyzed for marketing strategies.

Descriptive Statistics

Statistical methods that summarize and describe the features of a collection of information, typically represented in numerical analyses.

Significantly Higher

Refers to a noticeably greater amount or degree when comparing two or more values or occurrences.

Correlational Study

A research method that examines the relationship between two or more variables, determining how they might relate or predict each other without inferring a causal relationship.