Explain the Circumstances When a Bargain Purchase May Occur and Discuss

question 25

Essay

Explain the circumstances when a bargain purchase may occur and discuss the accounting treatment prescribed in AASB 3 Business Combinations for bargain purchases.

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Definitions:

Par Common Stock

The face value of a share of common stock as specified in the corporate charter.

Purchase Price

The total cost incurred to acquire an asset, including the price of the asset itself along with any additional costs necessary to bring the asset to a usable state.

Treasury Stock

Stock that has been bought back by the issuing company, reducing the amount of outstanding stock on the open market.

Sold for Less

A situation where the selling price of goods or services is less than their cost or original value.