Refer to P 3-2 in the main chapter.

For each of the six independent cases, assume that the tax base of the net identifiable assets is equal to their carrying value (i.e., no temporary differences exist between the two, and as such related deferred taxes are zero). Assume that the relevant future tax rate is 30%.

Required
For each independent case, make the appropriate deferred tax adjustment required in relation to the fair value adjustment allocated to the net identifiable assets, and calculate the goodwill/gain from bargain purchase.

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Case D Purchase price Fair value of net identifiable assets Carrying value of net identifiable assets $120 100 $120 $100 $80 120 $100 80 $80 100 120 80 100 100 120 120 80 80