Publics Company Acquired the Net Assets of Citizen Company During $\begin{array}{ll}\text { Current assets } & \$ 800,000 \\\text { Noncurrent assets } & 600,000 \\&\$1,400,000\end{array}$

question 3

Multiple Choice

Publics Company acquired the net assets of Citizen Company during 20X5. The purchase price was $800,000. On the date of the transaction, Citizen had no long-term investments in marketable equity securities and $400,000 in liabilities. The fair value of Citizen assets on the acquisition date was as follows: $\begin{array}{ll}\text { Current assets } & \$ 800,000 \\\text { Noncurrent assets } & 600,000 \\&\$1,400,000\end{array}$ How should Publics account for the $200,000 difference between the fair value of the net assets acquired, $1,000,000, and the cost, $800,000?

• A) Retained earnings should be reduced by $200,000.
• B) Current assets should be recorded at $685,000 and noncurrent assets recorded at $515,000.
• C) A $200,000 gain on acquisition of business should be recognized
• D) A deferred credit of $200,000 should be set up and subsequently amortized to future net income over a period not to exceed 40 years.

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Definitions:

Regular Customers

Individuals who frequently return to the same business, establishment, or service provider due to satisfaction, loyalty, or habit.

Free Meal

Often a complimentary offering, implying that something is received without an apparent cost, though it may imply hidden costs or obligations.

Age

A measurement of the length of time that an individual has lived, often used as a demographic variable in research and analytics.

Segmentation Variable

A characteristic used to divide a market into distinct subsets of customers sharing similar needs, preferences, or behaviors, aiding in targeted marketing strategies.