Question

Lake Incorporated purchased all of the outstanding stock of Huron Company paying $967,000 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) $ 130,900 $ 124,200 Property, plant, equipment) 619,000 757,000 Liabilities 151,700 177,000 Lake would record goodwill of: Multiple Choice $368,800. $0. $262,800. $85,800.

Answer 1

Goodwill is $262,800

Step-by-step explanation:

Goodwill is the excess of purchase consideration over fair value of net assets

Fair value of net assets is the fair value of total assets minus fair value of total liabilities

Fair value of total assets=$124,200+$757,000=$881,200

fair value of total liabilities=$177,000

fair value of net assets=$881,200 -$177,000=$704,200

Goodwill=purchase consideration-net assets

purchase consideration is $967,000

fair value of net assets $704,200

goodwill=$967,000-$704,200

goodwill=$262,800

The correct option is the third option in the multiple choices