Question

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $952,000 cash. Lake assumed all of the liabilities of Huron. Book values and fair values of acquired assets and liabilities were:

     

	Book Value	Fair Value
Current assets (net)	$131,400	$124,100
Property, plant, equip. (net)	613,000	755,000
Liabilities	150,700	176,000

     

Lake would record goodwill of:

    

Multiple Choice

• $358,300.

• $72,900.

• $248,900.

• $0.

Answer 1

Working Notes:
	CALCULATION OF NET ASSETS OF HURON COMPANY
	Particulars	Amount	Amount
	Total Current Assets (Net)	$                       1,24,100
	Property, Plant , Equipment (Net)	$                       7,55,000
	Total Assets		$       8,79,100
	Less: Liabilities
	Liabilities	$                       1,76,000
			$       1,76,000
	Net Assets Acquired		$       7,03,100
Solution:
	CALCULATION OF THE GOODWILL ON BUSINESS PURCHASE
	Goodwill                                     =	Consideration Paid for Business Purchase	"-"	Net Assets Acquired
	Goodwill                                     =	$                       9,52,000	"-"	$                  7,03,100
	Goodwill                                     =	$                       2,48,900
	Goodwill recorded in the consolidated balance sheet =	$       2,48,900
Answer =	Option 3 = $ 248,900