Flom Company is considering the cash purchase of 100% of the outstanding stock of Vargas Company. The

Question:

Flom Company is considering the cash purchase of 100% of the outstanding stock of Vargas Company. The terms are not set, and alternative prices are being considered for negotiation. The of Vargas Company shows the following values:

Appraisals reveal that the inventory has a fair value of $160,000 and that the land and building have fair values of $120,000 and $300,000, respectively.
1. Above what price will goodwill be recorded?
2. Below what price will a gain be recorded?

Goodwill
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Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...