Strong Company has had poor operating results in recent years and has a $160,000
ID: 2463390 • Letter: S
Question
Strong Company has had poor operating results in recent years and has a $160,000 net operating loss carry-forward. Leader Corp. pays $700,000 to acquire Strong and is optimistic about its future profitability potential. The book value and fair value of Strong's identifiable net assets is $500,000 at date of acquisition. Strong's tax rate is 30% and Leader's tax rate is 40%. What is goodwill resulting from this business combination?
A.
$40,000.
B.
$88,000.
C.
$104,000.
D.
$152,000.
E.
$248,000.
A.
$40,000.
Explanation / Answer
D.
$152,000
Consideration $700,000 - FV of Assets $500,000 = $200,000 Excess - FV Carry-Forward ($160,000 × .30) $48,000 = Unattributed Excess to Goodwill ($152,000)
D.
$152,000