Question

Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $1,060,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were: Book Value Fair Value Current assets (net) $ 185,000 $ 185,000 Property, plant, equip. (net) 615,000 835,000 Liabilities 180,000 180,000 Lake would record goodwill of:

Answer 1

Answer:

It will record a goodwill for 220,000 dollars

Explanation:

acquisition of 100%: 1,060,000 cash

fair value of Huron Company

current assets 185, 000

PPE                  835,000

Liabilities        (180,000)

Net:                 840,000

difference between fair value and acquisition cost:

1,060,000 - 840,000 = 220,000

Answer 2

Based on the various assets and liabilities of Lake Incorporated, a goodwill of $220,000 will be recorded.

The goodwill is calculated as:

= Purchase price - Current assets - Property, plant, equipment + Liabilities

Solving gives:

= 1,060,000 - 185,000 - 835,000 + 180,000

= $220,000

In conclusion, the goodwill is $220,000.

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