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?
A) Negative goodwill is recorded.
B) A deferred credit is recorded.
C) A gain on bargain purchase is recorded.
D) Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit.
E) Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain.

Question

Quizplus · Accepted Answer

When the consideration transferred is less than the fair value of net assets acquired, a gain on bargain purchase is recorded under the acquisition method.

In a Transaction Accounted for Using the Acquisition Method Where