Meredith Company and Kyle Company Were Combined in an Acquisition

question 25

Multiple Choice

Meredith Company and Kyle Company were combined in an acquisition transaction. Meredith was able to acquire Kyle at a bargain price. The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Meredith. After revaluing noncurrent assets to zero there was still some of the bargain purchase amount remaining (formerly termed negative goodwill) . Proper accounting treatment by Meredith is to report the amount as

• A) A discontinued operations item
• B) Part of current income in the year of combination
• C) A deferred credit and amortize it
• D) Paid-in capital

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Definitions:

Net Profit Margin

A financial metric that measures how much of every dollar of revenues is translated into profits, after all expenses are deducted.

Earnings Per Share

A measure of a company's profitability, calculated as net income divided by the number of outstanding shares.

Income Statement

A financial statement that shows a company's revenues, expenses, and profits over a specific period, highlighting operating performance.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from revenues.