In a Transaction Accounted for Using the Purchase Method Where

Multiple Choice

In a transaction accounted for using the purchase method where cost exceeds book value,which statement is true for the acquiring company with regard to its investment?

A) Net assets of the acquired company are revalued to their fair values and any excess of cost over fair value is allocated to goodwill.
B) Net assets of the acquired company are maintained at book value and any excess of cost over book value is allocated to goodwill.
C) Assets are revalued to their fair values.Liabilities are maintained at book values.Any excess is allocated to goodwill.
D) Long-term assets are revalued to their fair values.Any excess is allocated to goodwill.