If the value implied by the purchase price of an acquired company exceeds the fair values of identifiable net assets, the excess should be:
A) allocated to reduce any previously recorded goodwill and classify any remainder as an ordinary gain.
B) recognized as ordinary gain or loss.
C) allocated to reduce long-lived assets.
D) accounted for as goodwill.

Question

Quizplus · Accepted Answer

The excess of the purchase price over the fair values of identifiable net assets in an acquisition is accounted for as goodwill. This represents the future economic benefits arising from assets that are not capable of being individually identified and separately recognized.

If the Value Implied by the Purchase Price of an Acquired