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Salem Co Bellington Inc Required: Compute the Value of the Goodwill Account on the December

Essay

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Salem Co. had the following account balances as of December 1, 2010: $$\begin{array} { l r } \text { Inventory } & \$ 720,000 \\\text { Land } & 600,000 \\\text { Buildings - net (valued at } \$ 1,200,000 ) & 1,080,000 \\\text { Common stock ( } \$ 10 \text { par value) } & 960,000 \\\text { Retained earnings, December } 1,2010 & 1,320,000 \\\text { Revenues } & 720,000 \\\text { Expenses } & 600,000\end{array}$$ Bellington Inc. transferred $1.7 million in cash and 12,000 shares of its newly issued $30 par value common stock (valued at $90 per share) to acquire all of Salem's outstanding common stock.
-On January 1, 2011, Chester Inc. acquired 100% of Festus Corp.'s outstanding common stock by exchanging 37,500 shares of Chester's $2 par value common voting stock. On January 1, 2011, Chester's voting common stock had a fair value of $40 per share. Festus' voting common shares were selling for $6.50 per share. Festus' balances on the acquisition date, just prior to acquisition are listed below. $\begin{array}{lrr}&\text { Book Value } &\text { Fair Value }\\\text { Cash } & \$ 30,000 & \\\text { Accounts Receivable } & 120,000 & \$ 120,000\\\text { Inventory } & 200,000 & 230,000 \\\text { Land } & 230,000 & 290,000 \\\text { Building (net) } & 450,000 & 600,000 \\\text { Equipment (net) } & 175,000 & 160,000 \\\text { Accounts Payable } & (80,000) & (80,000)\\\text { Common Stock, } \$ 1 \text { par } & (500,000) \\\text { Paid-in Capital } & (350,000) \\\text { Retained Earnings, } 12 / 31 / 10 & (275,000)\end{array}$
Required: Compute the value of the Goodwill account on the date of acquisition, 1/1/11.