Company P acquires 100 percent of the voting shares of Company S for $275,000 on December 31,20X8.The fair value of the net assets of Company P at the date of acquisition was $300,000.This is an example of a(n):
A)positive differential.
B)bargain purchase.
C)unusual loss.
D)revaluation adjustment.

Question

Quizplus · Accepted Answer

A bargain purchase occurs when the fair value of the net assets acquired exceeds the consideration transferred. In this case, Company P paid $275,000 for Company S, but the fair value of Company S's net assets was $300,000, indicating a bargain purchase.

Company P Acquires 100 Percent of the Voting Shares of Company