Publics Company Acquired the Net Assets of Citizen Company During $$\begin{array} { l r } \text { Current assets } & \$ 800,000 \\\text { Noncurrent assets } & \underline { 600,000 } \\& \$ 1,400,000\end{array}$$

Multiple Choice

Publics Company acquired the net assets of Citizen Company during 2016.The purchase price was $800,000.On the date of the transaction, Citizen had no long-term investments in marketable equity securities and $400,000 in liabilities, of which the fair value approximated book value.The fair value of Citizen's assets on the acquisition date was as follows:
$$\begin{array} { l r } \text { Current assets } & \$ 800,000 \\\text { Noncurrent assets } & \underline { 600,000 } \\& \$ 1,400,000\end{array}$$ How should Publics account for the difference between the fair value of the net assets acquired and the acquisition price of $800,000?

A) Retained earnings should be reduced by $200,000.
B) A $600,000 gain on acquisition of business should be recognized.
C) A $200,000 gain on acquisition of business should be recognized.
D) A deferred credit of $200,000 should be set up and subsequently amortized to future net income over a period not to exceed 40 years.