On January 2, 2010, Bubba and Company paid $ 5,000,000 in cash to acquire 100% of the Cire Company€™s voting common stock. Cire€™s balance sheet on that date showed the following balances in its accounts:

The appraised value of Cire€™s net assets was $ 1,400,000 greater than its book value on the date of acquisition.
Required
a. Compute the amount of goodwill to be recorded on the date of acquisition.
b. How is goodwill accounted for subsequent to the date of acquisition?

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Cire Company Balance Sheet December 31, 2009 Plant and Equipment $5,574,900 Mortgage Payable Stockholders' Equity $4,324,900 1,250,000 $5,574,900 Total