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Goodwill Oak Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016,...

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Accounting

Goodwill

Oak Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is as follows:

Cash $46,000 Current liabilities $58,000
Accounts receivable 70,000 Bonds payable 176,000
Inventory 100,000 Common stock 240,000
Property, plant, and equipment (net) 580,000 Retained earnings 322,000
$796,000 $796,000

At December 31, 2016, Oak discovered the following about EKC:

No allowance for uncollectible accounts has been established. An allowance of $4,400 is considered appropriate.

The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Oak. The FIFO inventory valuation of the December 31, 2016, ending inventory would be $158,000.

The fair value of the property, plant, and equipment (net) is $700,000.

The company has an unrecorded patent that is worth $100,000.

The book values of the current liabilities and bonds payable are the same as their market values.

Required:

1. Compute the value of the goodwill if Oak pays $1,300,600 for EKC.

$

2. Why would the book value of a company's identifiable net assets differ from its market value?

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