During 2011, Bond Company Purchased the Net Assets of May

question 87

Multiple Choice

During 2011, Bond Company purchased the net assets of May Corporation for $1,000,000.On the date of the transaction, May had $300,000 of liabilities.The fair value of May's assets when acquired were as follows: How should the $500,000 difference between the fair value of the net assets acquired ($1,500,000) and the cost ($1,000,000) be accounted for by Bond?

• A)The $500,000 difference should be credited to retained earnings.
• B)The $500,000 difference should be recognized as a gain.
• C)The current assets should be recorded at $540,000 and the noncurrent assets should be recorded at $760,000.
• D)A deferred credit of $500,000 should be set up and then amortized to income over a period not to exceed forty years.

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