On January 1, 2014, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of Specialists

Question:

On January 1, 2014, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of Specialists Inc. at the time of purchase follows:

The total FMV of the individual assets of Specialists is $1.35 million, and the liabilities are valued on the balance sheet at FMV.

REQUIRED:
a. How can the FMV of Specialists€™ assets exceed the value of the assets on the balance sheet?
b. Why would Diversified pay more for Specialists than the FMV of the assets less the liabilities?
c. Provide the journal entry to record the purchase.
d. In the recent past goodwill was amortized over a period of time not to exceed forty years. Provide an argument to challenge this position.

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