Company J acquired all of the outstanding common stock of Company K in exchange for cash. The acquisition price exceeds the fair value of net assets acquired. How should Company J determine the amounts to be reported for the plant and equipment and long-term debt acquired from Company K?
Plant and Long-term
equipment debt
a. Fair value K's carrying amount
b. K's carrying amount K's carrying amount
c. Fair value Fair value
d. K's carrying amount Fair value
Explanation
Choice "c" is correct. When the acquisition price exceeds the fair value of net assets acquired, assets and liabilities should be presented at fair value.
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