### Problem Statement:Lake Incorporated purchased Huron Company for $850,000 cash. Lake assumed all of the liabilities. The book values and fair values of acquired assets and liabilities were as follows:#### Table of Book and Fair Values:| | Book Value | Fair Value ||-----------------------|------------|------------|| **Current assets** | $130,000 | $125,000 || **Property, plant, equipment** | $600,000 | $750,000 || **Liabilities** | $175,000 | $175,000 |### Question:Lake should record goodwill of:- A. $0- B. $150,000- C. $345,000- D. $850,000### Explanation:Calculate the goodwill by comparing the total purchase price with the fair value of net assets acquired:1. **Calculate Fair Value of Net Assets:** - Total Fair Value of Assets = $125,000 (Current assets) + $750,000 (Property, plant, equipment) = $875,000 - Less: Liabilities = $175,000 - Fair Value of Net Assets = $875,000 - $175,000 = $700,0002. **Calculate Goodwill:** - Purchase Price = $850,000 - Goodwill = Purchase Price - Fair Value of Net Assets - Goodwill = $850,000 - $700,000 = $150,000### Correct Answer:B. $150,000.

Goodwill is an intangible asset that provides future economic benefits. The goodwill on the business…

30. Lake Incorporated purchased Huron Company for $850,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were: Current assets Property, plant, equipment Liabilities Lake should record goodwill of: A. $0. B. C. D. $150,000. $345,000. $850,000. Book Value Fair Value $125,000 750,000 175,000 $130,000 600,000 175,000

30. Lake Incorporated purchased Huron Company for $850,000 cash. Lake assumed all of the liabilities. Book values and fair values of acquired assets and liabilities were: Current assets Property, plant, equipment Liabilities Lake should record goodwill of: A. $0. B. C. D. $150,000. $345,000. $850,000. Book Value Fair Value $125,000 750,000 175,000 $130,000 600,000 175,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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