In a Transaction Accounted for Using the Acquisition Method Where

question 31

Multiple Choice

In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is true?

• A) Negative goodwill is recorded.
• B) A deferred credit is recorded.
• C) A gain on bargain purchase is recorded.
• D) Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit.
• E) Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as gain.

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Definitions:

Torts

Civil wrongdoings recognized by law as grounds for a lawsuit, resulting in injury or harm constituting the basis for a claim by the injured party.

Independent Contractor

An individual or entity contracted to perform work for another entity as a non-employee, often with greater control over their work processes.

Nonemployee Agent

An individual or entity that acts on behalf of another person or entity in a specific role or capacity but is not considered an employee for legal and tax purposes.

Fiduciary Duty

An obligation to act in the best interest of another party. For instance, a corporation's board member has a fiduciary duty to the shareholders.