Question
During 2020, 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
During 2020, 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 Tacomas assets were:
Current assets |
| $ 360,000 |
Noncurrent assets |
| 840,000 |
|
| $1,200,000 |
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.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started