Question

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $950,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were: Lake would record goodwill of:

Answer 1

Answer:

$250,000

Explanation:

Book value and fair value of acquired assets and liabilities are given in the attached image.

Given:

Cash paid in exchange of stock = $950,000

Only fair value of assets and liabilities are considered

Goodwill = Cash - fair value of net assets

Fair value of net assets = Fair value of current assets + property, plant and equipment - liabilities

= 125,000 + 750,000 - 175,000

= $700,000

Goodwill = 950,000 - 700,000

               = $250,000