Grant Company acquired Lee Company for $600,000 cash.The fair value of Lee's assets was $520,000,and the company had $40,000 in liabilities.Which of the following choices would reflect the acquisition on the horizontal financial statements model?

Question

Quizplus · Accepted Answer

The acquisition will decrease cash by $600,000, increase "Lee's Assets" by $520,000 (the assets' fair value), increase liabilities by $40,000 (the amount assumed), and increase goodwill for the difference of $120,000. The cash paid of $600,000 is reported as a cash outflow for investing activities.

Grant Company Acquired Lee Company for $600,000 Cash