Which of the following statements about a bargain purchase is TRUE?
A)It is reported on the financial statements as an "excess of fair value over cost of assets acquired".
B)Assets and liabilities of the acquired company are reported at their fair value.
C)It is reported as a deferred credit on the financial statements called negative goodwill.
D)Assets and liabilities of the acquired company are reported at net book value.

Question

Quizplus · Accepted Answer

In a bargain purchase, the assets and liabilities of the acquired company are reported at their fair value. This is because the purchase price is lower than the fair value of the assets and liabilities acquired. The excess of fair value over the purchase price is recognized as a gain on the acquirer's financial statements. Therefore, options A, C, and D are incorrect.

Which of the Following Statements About a Bargain Purchase Is