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.

Question

Quizplus · Accepted Answer

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)

Strong Company Has Had Poor Operating Results in Recent Years