In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?
Select one:
A. A gain on bargain purchase is recorded.
B. Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain.
C. A deferred credit is recorded.
D. Negative goodwill is recorded.
E. Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit.
Which one of the following is a characteristic of a business combination that is accounted for as an acquisition?
Select one:
A. Fair value for the consideration transferred by the acquirer as well as the fair value of items received by the acquirer can enter into the determination of the acquirer’s accounting valuation of the acquired company.
B. Fair value only for the consideration transferred by the acquirer can enter into the determination of the acquirer’s accounting valuation of the acquired company.
C. Only fair value of identifiable assets received enters into the determination of the acquirer’s accounting valuation of the acquired company.
D. Fair value only for items received by the acquirer can enter into the determination of the acquirer’s accounting valuation of the acquired company.
E. Fair value for only consideration transferred and identifiable assets received by the acquirer can enter into the determination of the acquirer’s accounting valuation of the acquired company.
