During 2015, Bond Company Purchased the Net Assets of May

question 41

Multiple Choice

During 2015, Bond Company purchased the net assets of May Corporation for $2,000,000. On the date of the transaction, May had $600,000 of liabilities. The fair value of May's assets when acquired were as follows: How should the $1,000,000 difference between the fair value of the net assets acquired ($3,000,000) and the cost ($2,000,000) be accounted for by Bond?

• A) The $1,000,000 difference should be credited to retained earnings.
• B) The $1,000,000 difference should be recognized as a gain.
• C) The current assets should be recorded at $1,080,000 and the noncurrent assets should be recorded at $1,520,000.
• D) A deferred credit of $1,000,000 should be set up and then amortized to income over a period not to exceed forty years.

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