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; inventories $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 acquisition cost is $134,000, resulting in goodwill of $10,000 ($134,000 - $124,000).

Fredericks Limited Acquired the Identifiable Assets and Liabilities of Nicole