Economics · Corporate Accounting
Tazer Co, a parent company, acquired Lowdown Co, an unincorporated entity, for $2.8 million. A fair value exercise performed on Lowdown Co's net assets at the date of purchase showed: Property, plant and equipment: $3,000,000 Identifiable intangible asset: $500,000 Inventories: $300,000 Trade receivables less payables: $200,000 Total Fair Value of Net Assets: $4,000,000 How should this transaction be reflected in Tazer Co's consolidated statement of financial position?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Record the purchase simply as a financial asset investment at cost of $2.8 million.
- 2Derecognise the identifiable intangible asset, record the remaining net assets and credit profit or loss with $700,000.
- 3Record the net assets at their fair values ($4.0m) and credit Tazer Co's consolidated goodwill with $1.2 million.
- 4Record the net assets at their fair values ($4.0m) and credit profit or loss with $1.2 million as a gain on bargain purchase.✓
Correct answer
Record the net assets at their fair values ($4.0m) and credit profit or loss with $1.2 million as a gain on bargain purchase.
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