(CMA adapted, Dec 92 #9) In a business combination that is accounted for as a purchase and does not create negative goodwill, the assets of the acquired company are to be recorded on the books of the acquiring company at

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In a business combination that is accounted for as a purchase and does not create negative goodwill, the assets of the acquired company are to be recorded on the books of the acquiring company at fair market value. This is because the acquiring company is purchasing the assets of the acquired company, and the fair market value reflects the price that would be obtained in an arm's length transaction. The other options (original cost, original cost less accumulated depreciation, book value, liquidation value) do not accurately reflect the value of the assets in a purchase transaction.

(CMA Adapted, Dec 92 #9) in a Business Combination That