Conway Ltd. acquired all the assets and liabilities of Elliott Ltd. by issuing common shares to Elliott. After this transaction, Elliott owned 30% of Conway's outstanding shares. How should Conway record Elliott's assets and liabilities on its books?
A)At their fair market value.
B)At their original cost.
C)At their net book value.
D)At their fair market value plus an allocated share of goodwill to each item.

Question

Quizplus · Accepted Answer

According to the information provided, the transaction involved the acquisition of all assets and liabilities of Elliott Ltd by Conway Ltd. Therefore, it would be appropriate for Conway to record the assets and liabilities acquired at their fair market value. This approach ensures that the assets and liabilities are valued accurately and reflect their current market value. Additionally, fair market value is typically the most reliable basis for determining the value of assets and liabilities in an acquisition. As such, this option should be chosen.