5) Saveed Corporation purchased the net assets of Penny Inc. on January 2, 2011 for $1,690,000 cash and also paid $15,000 in direct acquisition costs. Penny dissolved as of the date of the acquisition. Penny's balance sheet on January 2, 2011 was as follows:
Accounts receivable-net$190,000Current liabilities$235,000
Inventory480,000Long term debt650,000
Land10,000Common stock ($1 par)25,000
Equipment-net 240,000Retained earnings 590,000
Total assets$1,650,000Total liab. & equity $1,650,000
Fair values agree with book values except for inventory, land, and equipment, which have fair values of $640,000, $140,000 and $230,000, respectively. Penny has customer contracts valued at $20,000.