In a transaction accounted for using the acquisition method where consideration transferred is less than fair value of net assets acquired, which statement is t

A) Negative goodwill is recorded.

B) A deferred credit is recorded.

C) A gain on bargain purchase is recorded.

D) Long-term assets of the acquired company are reduced in proportion to their fair values.  Any excess is recorded as a deferred credit.

E) Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values.  Any excess is recorded as gain.

Answer: C

Learning Objective: 02-04 

Learning Objective: 02-05

Topic: Acquisition―Valuation principles

Topic: Acquisition―Calculate goodwill or bargain

Difficulty: 1 Easy  

Blooms: Analyze

AACSB: Analytical Thinking

AICPA: BB Critical Thinking

AICPA: FN Measurement