The Clementine Company agreed to purchase the Orange Company for $650,000. At the date of purchase, Orange had current assets with a fair market value of $400,000, noncurrent assets including no marketable securities) with a fair market value of $700,000, and liabilities of $500,000. In accounting for this transaction, Clementine should

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The purchase price of $650,000 exceeds the net assets acquired (current assets of $400,000 + noncurrent assets of $700,000 - liabilities of $500,000 = $600,000) by $50,000. This excess is recorded as goodwill.

The Clementine Company Agreed to Purchase the Orange Company for $650,000