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In-Lab 8 intangibles with solution

In-Lab 8 intangibles with solution - ACCT 401L Lab...

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ACCT 401L Lab Assignment #8 Intangibles Name____________________ Date 3/18/11 Problem 1: Athena Paper Corporation acquired for cash 100% of the outstanding common stock of Georgia, Inc., a supplier of wood pulp. The purchase price of $4,500,000 was significantly higher than the book value of Georgia’s net assets (assets less liabilities) of $2,800,000. The Athena controller recorded the difference of $1,700,000 as an asset, goodwill. REQUIRED: 1. Discuss the meaning of the term goodwill . 2. In what situation would the Athena controller be correct in her valuation of goodwill?
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Problem 2: On May 31, 2011, Armstrong Company paid $3,500,000 to acquire all of the common stock of Hall Corporation, which became a division of Armstrong. Hall reported the following balance sheet at the time of the acquisition: Current assets $ 900,000 Current liabilities $ 600,000 Noncurrent assets 2,700,000 Long-term liabilities 500,000 Stockholders’ equity 2,500,000 Total liabilities and Total assets $3,600,000 stockholders’ equity $3,600,000 It was determined at the date of the purchase (May 31, 2011) that the fair value of the identifiable net assets of Hall was $2,800,000.
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