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)It is reported as a deferred credit on the financial statements called negative goodwill.
C)Assets and liabilities of the acquired company are reported at net book value.
D)Assets and liabilities of the acquired company are reported at their fair value.

Question

Quizplus · Accepted Answer

In a bargain purchase, the fair value of the assets acquired exceeds the cost of acquiring them. This means that the assets and liabilities of the acquired company are reported at their fair value, not at net book value. Therefore, option D is the correct choice. Option A is incorrect because it describes a situation where the cost of the assets acquired exceeds their fair value, which is the opposite of a bargain purchase. Option B is incorrect because negative goodwill is not a recognized accounting term.

Which of the Following Statements About a Bargain Purchase Is