Which of the following statements concerning bargain purchase prices is correct?
a) any previously recorded goodwill on the seller's books is eliminated and no new goodwill is recorded
b) long-lived assets, including in-process R&D and excluding marketable securities, are recorded at fair market value minus an adjustment for the bargain under current GAAP
c) an extradordinary gain in the event that all long-lived assets other than marketable securities are reduced to the original purchase price, under current GAAP
d) current assets, long-term investments in marketable securities (other than those accounted for by the equity method), assets to be disposed by sale, deferred tax assets, prepaid assets relating to pension or other post-retirement benefit plans, and assumed liabilities are the only accounts that are always recorded at fair market value, under current GAAP
Ans: a) any previously recorded goodwill on the seller's books is eliminated and no new goodwill is recorded
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Billings Company has the following costs when producing 100,000 units:
Variable costs $600,000 Fixed costs 900,000 An outside supplier has offered to make the item at $4.50 a unit. If the decision is made to purchase the item outside, current production facilities could be leased to another company for $165,000. The net increase (decrease) in the net income of accepting the supplier's offer is a) $(15,000). b) $285,000. c) $315,000. d) $840,000.
Which characteristic cannot easily be assessed even after purchase since the customers do not have the knowledge or experience?
a. heterogeneity feature b. perishable attribute c. experience quality d. credence quality