Blue sky company's 12/31/21 balance sheet reports assets of $7 and liabilities of $28. all of blue sky's assets' book values approximate their fair value, except for land, which has a fair value that is $42 greater than its book value. on 12/31/21, horace wimp corporation paid $714 to acquire blue sky. what amount of goodwill should horace wimp record as a result of this purchase?

a. $14
b. $294
c. $0
d. $252

d. $2520000

Explanation:

For computing the cost of the goodwill, first we have to calculate the fair value of the net asset which is shown below:

The fair value of net asset = Assets - liabilities + excess value

= $7,000,000 - $2,800,000 + $420,000

= $4,620,000

And, the acquired value of Blue sky is $7,140,000

So, the goodwill would be  

= $7,140,000 - $4,620,000

= $2,520,000

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answer the law of increasing costs;