A Subsidiary Was Acquired for Cash in a Business Combination

question 32

Multiple Choice

A subsidiary was acquired for cash in a business combination on December 31, 20X1. The purchase price exceeded the fair value of identifiable net assets. The acquired company owned equipment with a fair value in excess of the book value as of the date of the combination. A consolidated balance sheet prepared on December 31, 20X1, would

• A)report the excess of the fair value over the book value of the equipment as part of goodwill.
• B)report the excess of the fair value over the book value of the equipment as part of the plant and equipment account.
• C)reduce retained earnings for the excess of the fair value of the equipment over its book value.
• D)make no adjustment for the excess of the fair value of the equipment over book value. Instead, it is an adjustment to expense over the life of the equipment.

---

Definitions:

Trial Proceedings

The formal process in a court of law involving the examination of evidence to determine guilt, establish innocence, or resolve a dispute.

Appellee

The party in a legal case who won at the lower court level and is defending that decision in a higher court against an appeal.

Appellant

The party who appeals a decision made by a lower court, seeking review and reversal of that decision by a higher court.

Writ Of Execution

A court order authorizing the enforcement of a judgment, often by seizing and selling the debtor's property.