Question

Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $1,000,000 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) $ 190,000 $ 125,000 Property, plant, equip. (net) 650,000 765,000 Liabilities 255,000 255,000 Lake would record goodwill of

Answer 1

Answer:

Lake would record goodwill of $365,000

Explanation:

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

Fair value of net assets = $125,000 + $765,000

Fair value of net assets = $890,000

Fair market value = Fair value of net assets - Liabilities assumed

Fair market value = $890,000 - 255,000

Fair market value = $635,000

Goodwill = Consideration - Fair market value

= $1,000,000 - $635,000

= $365,000

Hence, the amount of goodwill is $365,000.