Lake Incorporated purchased all of the outstanding stock of Huron Company, paying $850,000 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) $ 130,000 $ 125,000
Property, plant, equip. (net) 600,000 750,000
Liabilities 175,000 175,000
Lake would record goodwill of:
A) $0.
B) $150,000.
C) $345,000.
D) $850,000.
Answer: B
Vikings Inc. reports the following amounts:
Book Value Fair Value
Assets $ 400,000 $ 500,000
Liabilities 45,000 45,000
Net income 25,000
How much goodwill would be recorded if Torretta Holdings purchases Vikings, assuming its liabilities, for $635,000?
A) $255,000.
B) $280,000.
C) $180,000.
D) $100,000.
Answer: C
Northern purchased the entire business of Southern including all its assets and liabilities for $600,000. Below is information related to the two companies:
Northern Southern
Fair value of assets $ 1,050,000 $ 800,000
Fair value of liabilities 575,000 300,000
Reported assets 800,000 650,000
Reported liabilities 500,000 250,000
Net Income for the year 60,000 50,000
How much goodwill did Northern pay for acquiring Southern?
A) $100,000.
B) $300,000.
C) $200,000.
D) $150,000.
Answer: A
