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MC Question 16
Tazer, a parent company, acquired Lowdown, an unincorporated entity, for $2·8 million.
A fair value exercise performed on Lowdown’s net assets at the date of purchase showed:
| $’000 | |||
|---|---|---|---|
| Property, plant and equipment | 3,000 | ||
| Identifiable intangible asset | 500 | ||
| Inventory | 300 | ||
| Trade receivables less payables | 200 | ||
4,000 |
How should the purchase of Lowdown be reflected in Tazer’s consolidated statement of financial position?
| A | Record the net assets at their values shown above and credit profit or loss with $1·2 million |
|---|---|
| B | Record the net assets at their values shown above and credit Tazer’s consolidated goodwill with $1·2 million |
| C | Write off the intangible asset ($500,000), record the remaining net assets at their values shown above and credit profit or loss with $700,000 |
| D | Record the purchase as a financial asset investment at $2·8 million |
