Practice prompt · Q:intangibles-research-software-and-goodwill/goodwill-and-bargain-purchase-001

Compute the residual in an acquisition

Tests whether the learner computes goodwill as a residual and knows what a negative residual produces.

Updated Sep 11, 2026 Review due Nov 18, 2026

Practice

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An acquirer transfers consideration of 4,200,000. The fair value of identifiable assets acquired is 5,600,000 and the fair value of liabilities assumed is 700,000. The acquirer has reassessed its identification and measurement and found no errors.

The reassessment requirement is the design. An acquirer that could book income simply by buying something would have an easy way to manufacture earnings, so it must show it looked for the mistake first.

Choose the best answer. a A bargain purchase gain of 700,000, recognized in earnings on the acquisition date. b Negative goodwill of 700,000, presented as a contra asset and amortized. c Goodwill of 700,000, because the residual is always recorded as goodwill. d Goodwill of 1,400,000, using the fair value of assets without deducting liabilities assumed.

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Answer: a

Choice a. Identifiable net assets of 4,900,000 less consideration of 4,200,000 gives a 700,000 gain after reassessment.