Corporation A purchased the net assets of Corporation B for $80,000. On the date of As purchase,
Question:
Corporation A purchased the net assets of Corporation B for $80,000. On the date of A’s purchase, Corporation B had no long-term investments in marketable securities and $10,000 (book and fair value) of liabilities. The fair values of Corporation B’s assets, when acquired, were
Current assets......................................$ 40,000
Noncurrent assets..................................60,000
Total....................................................$ 100,000
Under FASB Statement No. 141R and No.160 [Topics 805 and 810], how should the $10,000 difference between the fair value of the net assets acquired ($90,000) and the value implied by the purchase price ($80,000) be accounted for by Corporation A?
(a) The $10,000 difference should be credited to retained earnings.
(b) The noncurrent assets should be recorded at $50,000.
(c) The current assets should be recorded at $36,000, and the noncurrent assets should be recorded at $54,000.
(d) A current gain of $10,000 should be recognized.
CorporationA Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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d Once the determination is made that ...View the full answer
