4. The goodwill resulted from the purchase of another hardware store that has since been consolidated into the existing location. The goodwill was attributed to customer loyalty. 5. Liabilities are...

4. The goodwill resulted from the purchase of another hardware store that has since been consolidated into the existing location. The goodwill was attributed to customer loyalty.

5. Liabilities are fairly stated except that there should be a provision for the estimated loss on the lawsuit.

On the basis of your research, you are convinced that the statements of Al’s Hardware are not representative and need major restatement. Your client is not interested in being associated with statements that are not accurate.

Your client asks you to make recommendations on two concerns:

1. Does the price asked seem to be a real bargain? Consider the fair value of the entire equity of Al’s Hardware; then decide if the price is reasonable for a 60% interest.

2. If the deal were completed, what accounting methods would you recommend either on the books of Al’s Hardware or in the consolidation process? Al’s Hardware would remain a separate legal entity with a substantial noncontrolling interest.