E12-12B (Accounting for Goodwill) Palmer, owner of Palmer Interiors, is negotiating for the purchase of Ruth Inc. The balance sheet of Ruth Inc. is given in an abbreviated form, as follows. RUTH INC. BALANCE SHEET AS OF DECEMBER 31, 2014 Assets Liabilitie

E12-12B (Accounting for Goodwill) Palmer, owner of Palmer Interiors, is negotiating for the purchase of Ruth Inc. The balance sheet of Ruth Inc. is given in an abbreviated form, as follows.

                                                                   RUTH INC.

                                                            BALANCE SHEET

                                                       AS OF DECEMBER 31, 2014         

Assets                                     Liabilities and Stockholders’ Equity  

Cash               $ 240,000         Accounts payable                     $ 120,000

Land                  168,000         Long-term notes payable              720,000

Building (net)     480,000         Total liabilities                                840,000

Equipment (net) 420,000         Common stock            $480,000

Copyright (net)    72,000         Retained earnings          60,000    540,000

Total assets $1,380,000          Total liabilities and                    $1,380,000

Palmer and Ruth agree that:

1. Land is undervalued by $72,000.

2. Equipment is overvalued by $12,000.

Ruth agrees to sell the business to Palmer for $840,000.

Instructions

Prepare the entry to record the purchase of Ruth Inc. on Palmer’s books.