Question

Under the acquisition method for business combinations, and assuming the buyer gets 100% ownership, a bargain purchase gain would be shown when:

	a.	Cost of the investment was less than the net fair value of the subsidiary's assets at the beginning of the year of the acquisition
	b.	Cost of the investment was less than the net fair value of the subsidiary’s assets at the acquisition date.
	c.	Cost of the investment was less than the net book value of the subsidiary's assets at the beginning of the year of the acquisition.
	d.	Cost of the investment was less than the net book value of the subsidiary’s assets at the acquisition date

Answer 1

Correct Answer:

Option(b) is correct statement that cost of the investment was less than the fair value of the subsidiary assets at the acquisition date

Incorrect Answers:

Option(a) is incorrect statement that cost of the investment was less than the fair value of the subsidiary assets at the begining of the year of the acquisition.

Option(c) is incorrect statement because the cost of the investment was less than the net book value of the subsidiary assets at the begriming of the year of the acquisition.

Option(d) is incorrect statement because the cost of the investment was less then the net book value of the subsidiary assets at the acquisition date.

So correct answer is option (b)