On January 1, 2020, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of...

  

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On January 1, 2020, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of Specialists Inc. at the time of purchase follows: Assets Liabilities and Shareholders' Equity Current assets $650,000 Liabilities $250,000 Long-term assets 330,000 Shareholders' equity 730,000 Total liabilities and Total assets $980,000 shareholders' equity $980,000 The total FMV of the individual assets of Specialists is $1.35 million, and the liabilities are valued on the balance sheet at FMV. INSTRUCTIONS: 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. Prior to 2001, goodwill was amortized over a period of time not to exceed 40 years. Provide an argu- ment to challenge this position. On January 1, 2020, Diversified Industries purchased Specialists Inc. for $1.8 million. The balance sheet of Specialists Inc. at the time of purchase follows: Assets Liabilities and Shareholders' Equity Current assets $650,000 Liabilities $250,000 Long-term assets 330,000 Shareholders' equity 730,000 Total liabilities and Total assets $980,000 shareholders' equity $980,000 The total FMV of the individual assets of Specialists is $1.35 million, and the liabilities are valued on the balance sheet at FMV. INSTRUCTIONS: 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. Prior to 2001, goodwill was amortized over a period of time not to exceed 40 years. Provide an argu- ment to challenge this position.

Answer rating: 100% (QA)

a Assets are recorded on the balance sheet at its carrying value which is cost ... View the full answer