6.1 BUSINESS COMBINATIONS & CONSOLIDATIONS

Question 1

IN A BUSINESS COMBINATION UNDER THE ACQUISITION METHOD The general guidelines for assigning amounts to the inventories acquired provide for

Answer 1

In a business combination, under the acquisition method, the amounts assigned to inventory for raw materials is to be valued at replacement cost. Work in process is to be valued at selling price of the finished goods less costs to complete, cost of disposal, and a reasonable profit allowance. Finished goods are to be valued at selling prices less costs of disposal and a reasonable profit allowance.

Question 2

how bargain purchase gain is recognized in the acquirees books

Answer 2

Any bargain purchase gain recognized by the acquired entity as an adjustment to additional paid-in capital (or net assets of a non-for-profit acquire