In a transaction accounted for using the purchase method where cost exceeds book value,which statement is true for the acquiring company with regard to its investment?

Question

Quizplus · Accepted Answer

In a transaction accounted for using the purchase method where cost exceeds book value, the acquiring company revalues the net assets of the acquired company to their fair values. Any excess of the cost of the acquisition over the fair value of the net assets acquired is allocated to goodwill. Therefore, option A is the correct answer.

In a Transaction Accounted for Using the Purchase Method Where