Exercise 7 (LO 5) Tax loss carryover. Lake Company had the following balance sheet on December 31, 20X1, when it was acquired for $900,000 in cash by Atlantic Corporation Lake Company Balance Sheet December 31, 20X1 Assets $ 60,000 Current assets ......... Equipment (net) ........ Building (net) ......... $100,000 200,000 Liabilities and Equity Current liabilities ....... Stockholders' equity: Common stock ($5 par)............ $100,000 Retained earnings ..... 410,000 Total liabilities and equity 510,000 650 $570,000 Total assets. $570,000 All assets have fair values equal to their book values. The combination is structured as a tax- free exchange. Lake Company has a tax loss carryforward of $400,000, which it has not recorded. The balance of the $400,000 tax loss carryover is considered fully realizable. Atlantic is taxed at a rate of 30%. Record the acquisition of Lake Company by Atlantic Corporation Balance Sheet December 31, 20x1 Liabilities and Equity $100,000 200,000 270,000 $ 60,000 Current liabilities Stockholders' equity: Common stock ($5 par) Retained earnings Total liabilities and equity $100,000 $570,000 $570,000 510,000 650, 00 All assets have fair values equal to their book values. The combination is structured as a tax free exchange. Lake Company has a tax loss carryforward of $400,000, which it has not recorded. The balance of the $400,000 tax loss carryover is considered fully realizable. Atlantic is taxed at a rate of 30%. Record the acquisition of Lake Company by Atlantic Corporation. Exercise 8 (LO 4 Cantince