Which of the following statements is true about a bargain purchase?

A) The purchase consideration paid by the parent for its share of the aquiree is less than the fair value of the shares.
B) The purchase consideration paid by the parent for its share of the aquiree is equal to the fair value of the shares.
C) The purchase consideration paid by the parent for its share of the aquiree is more than the fair value of the shares.
D) The purchase consideration paid by the parent for its share of the aquiree is less than the carrying value of the shares.

Question

Britannia Ramstrom · Accepted Answer

Final Answer : A, Explanation :  A bargain purchase occurs when the purchase consideration paid by the parent for its share of the acquiree is less than the fair value of the shares. This results in a gain on bargain purchase being recognized in the consolidated financial statements. Options B and C are incorrect as they do not meet the criteria of a bargain purchase. Option D refers to a situation where the purchase consideration is less than the carrying value of the shares, but this does not necessarily result in a bargain purchase.

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