Fredericks Limited acquired the identifiable assets and liabilities of Nicole Limited for $134 000. The items acquired, stated at fair value, are: Plant $72 000 Inventory $40 000 Accounts receivable $18 000 Patents $10 000 Accounts payable $16 000. The difference on acquisition is:
A) Gain on bargain purchase $10 000
B) Gain on bargain purchase $16 000
C) Goodwill of $10 000
D) Goodwill of $124 000.

Question

Quizplus · Accepted Answer

The total fair value of identifiable net assets is $124,000 ($72,000 + $40,000 + $18,000 + $10,000 - $16,000). The purchase price is $134,000, so the difference is $10,000, which is recorded as goodwill.

Fredericks Limited Acquired the Identifiable Assets and Liabilities of Nicole