Question

When does gain recognition accompany a business combination?In a combination created in the middle of a fiscal year.When a bargain purchase occurs.In an acquisition when the value of all assets and liabilities cannot be determined.When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company.

Answer 1

Answer:

When a bargain purchase occurs.

Explanation:

Whenever there is a business combination and there is an investment by a company into another company, called as holding and subsidiary, then the holding company pays for the assets acquired in business combination of subsidiary company.

When the amount paid is significantly less than the fair value of assets acquired, then there is a bargain purchase, and then the gain is recognized for the difference in amount of purchase price and net fair value of assets.

Thus correct option is,

When a bargain purchase occurs.