ACME Co.paid $110,000 for the net assets of Comb Corp.At the time of the acquisition the following information was available related to Comb's balance sheet:
$$\begin{array} { l r r }
& \text { Book Value } & \text { Fair Value } \
\text { Current Assets } & \$ 50,000 & \$ 50,000 \
\text { Building } & 80,000 & 100,000 \
\text { Equipment } & 40,000 & 50,000 \
\text { Liabilities } & 30,000 & 30,000
\end{array}$$ What is the amount of gain or loss on disposal of business should Comb Corp.recognize?
A)Gain of $60,000
B)Gain of $60,000.
C)Loss of $30,000
D)Loss of $60,000

Question

ACME Co.paid $110,000 for the net assets of Comb Corp.At the time of the acquisition the following information was available related to Comb's balance sheet:
$$\begin{array} { l r r } 
& \text { Book Value } & \text { Fair Value } \
\text { Current Assets } & \$ 50,000 & \$ 50,000 \
\text { Building } & 80,000 & 100,000 \
\text { Equipment } & 40,000 & 50,000 \
\text { Liabilities } & 30,000 & 30,000
\end{array}$$ What is the amount of gain or loss on disposal of business should Comb Corp.recognize?
A)Gain of $60,000
B)Gain of $60,000.
C)Loss of $30,000
D)Loss of $60,000

Quizplus · Accepted Answer

In this scenario, the net assets of Comb Corp were acquired for $110,000, which means that Comb Corp was purchased at a price higher than its net assets. 
The book value of Comb Corp's net assets is calculated as follows: 
Total Assets - Total Liabilities = $200,000 - $100,000 = $100,000 
Therefore, the gain or loss on disposal of business for Comb Corp can be calculated as follows: 
Acquisition price - Book value of net assets = $110,000 - $100,000 = $10,000 
Since the acquisition price is higher than the book value of net assets, a loss of $10,000 ($110,000 - $100,000) should be recognized by Comb Corp. Therefore, the correct choice is C - Loss of $30,000 is the best answer.

ACME CoPaid $110,000 for the Net Assets of Comb Corp