Question
During 2018, Carla Vista Company purchased the net assets of May Corporation for $1100000. On the date of the transaction, May had $600000 of liabilities.
During 2018, Carla Vista Company purchased the net assets of May Corporation for $1100000. On the date of the transaction, May had $600000 of liabilities. The fair value of May's assets when acquired were as follows: Current assets $1080000 Noncurrent assets 1920000 $3000000 How should the $1900000 difference between the fair value of the net assets acquired ($3000000) and the cost ($1100000) be accounted for by Carla Vista? The current assets should be recorded at $1080000 and the noncurrent assets should be recorded at $1,720,000. The $1900000 difference should be credited to retained earnings. The $1900000 difference should be recognized as a gain. A deferred credit of $1900000 should be set up and then amortized to income over a period not to exceed forty years.
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