During 2017, Spokane Ltd

question 47

Multiple Choice

During 2017, Spokane Ltd.purchased the net assets of Tacoma Corp.for $635,000.On the date of the transaction, Tacoma reported $200,000 in liabilities.As well, the fair value of Tacoma's assets were: How should the difference between the fair value of the net assets acquired and the cost be accounted for by Spokane?

• A)The difference should be credited to retained earnings.
• B)The difference should be recognized as a gain in net income.
• C)The noncurrent assets should be reduced appropriately.
• D)The difference should be prorated between the current and the noncurrent assets.

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Definitions:

Single

A filing status for unmarried taxpayers who do not qualify for any other filing status on their tax return.

American Opportunity Tax Credit

A refund for allowable educational fees paid for a qualifying scholar during their first four years of advanced education.

Qualifying Expenses

Specific expenses that meet criteria set by tax laws or other regulations for deduction or special treatment.

AGI

Adjusted Gross Income, calculated by taking gross income and subtracting specific deductions. It's used to determine taxable income and eligibility for certain tax credits and deductions.