1. Prepare a presentation showing in good form the calculation of Goodwill in this transaction. 2. Explain the rational for your calculations.

/in /by

The board of Directors of Pastrana, Inc. is negotiating the purchase of Burgos’ Galleries. The balance sheet @ 12/31/2009 of Burgos’ is presented below:

Assets                                                                          Liabilities & Stockholder’s Equity

Cash                                        $   70,000                    Notes Payable                             $     50,000

Land                                         $ 100,000                    Account Payable                          $   300,000

Equipment                               $ 375,000                       Total Liabilities                        $   350,000

Intangible Assets                    $   30,000                    Common Stocks     $ 200,000            

                                                ________                    Retained Earnings     $   25,000 $   225,000

Total Assets                            $ 575,000                      Total Liabilities & Stk’s Ety       $   575,000

 

 Additional Information:

1. Land is undervalued by $50,000.

2. Equipment is overvalued by $ 5,000. 3. Burgos’ agrees to sell the business to Pastrana Co. for $380,000.

 

 

Required:

1. Prepare a presentation showing in good form the calculation of Goodwill in this transaction.

2. Explain the rational for your calculations.