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:

Craving

A powerful and intense desire for a specific substance or experience, often associated with addiction.

Obsession

A persistent, unwanted, and intrusive thought, image, or urge that causes significant anxiety or distress.

Reward Theory

A psychological principle suggesting that behaviors are motivated by the anticipation of rewarding outcomes.

Social Exchange Theory

A theory suggesting that social behavior is the result of an exchange process, aiming to maximize benefits and minimize costs in interactions.