P Company purchased the net assets of S Company for $225,000. On the date of P's purchase, S Company had no investments in marketable securities and $30,000 (book and fair value) of liabilities. The fair values of S Company's assets, when acquired, were: How should the $45,000 difference between the fair value of the net assets acquired ($270,000) and the consideration paid ($225,000) be accounted for by P Company?
A) The noncurrent assets should be recorded at $ 135,000.
B) The $45,000 difference should be credited to retained earnings.
C) The current assets should be recorded at $102,000, and the noncurrent assets should be recorded at $153,000.
D) An ordinary gain of $45,000 should be recorded.

Question

P Company purchased the net assets of S Company for $225,000. On the date of P's purchase, S Company had no investments in marketable securities and $30,000 (book and fair value) of liabilities. The fair values of S Company's assets, when acquired, were:  How should the $45,000 difference between the fair value of the net assets acquired ($270,000) and the consideration paid ($225,000) be accounted for by P Company?
A) The noncurrent assets should be recorded at $ 135,000. 
B) The $45,000 difference should be credited to retained earnings. 
C) The current assets should be recorded at $102,000, and the noncurrent assets should be recorded at $153,000. 
D) An ordinary gain of $45,000 should be recorded.

Quizplus · Accepted Answer

The Answer of P Company purchased the net assets of S Company for $225,000. On the date of P's purchase, S Company had no investments in marketable securities and $30,000 (book and fair value) of liabilities. The fair values of S Company's assets, when acquired, were:  How should the $45,000 difference between the fair value of the net assets acquired ($270,000) and the consideration paid ($225,000) be accounted for by P Company?
A) The noncurrent assets should be recorded at $ 135,000. 
B) The $45,000 difference should be credited to retained earnings. 
C) The current assets should be recorded at $102,000, and the noncurrent assets should be recorded at $153,000. 
D) An ordinary gain of $45,000 should be recorded.

P Company Purchased the Net Assets of S Company for $225,000