| Positive Differentials [CLO: 4] |
Prior to beginning work on this discussion forum, read Chapter 4 of your course text-
Christensen, T.E., Cottrell, D.M., & Budd, C.J.H. (2019). Advanced financial accounting (12th ed). McGraw-Hill Education.
Review McGraw Hill Education. (2019). Chapter 4: Consolidation of wholly-owned subsidiaries acquired at more than book value [PowerPoint slides]. McGraw-Hill Education.
Based on this week’s reading and power point:
- If a company purchases 100% of another company and the amount paid is more than the book value of the company purchased and a positive differential exists, explain the three reasons this might occur. For each of the three provided reasons, explain the process and journal entries that would be made. Provide an example of a company purchase and the result of the overpayment.
- If a company purchases 100% of another company and the amount paid is less than the book value of the company purchased and a bargain purchase differential exists, explain the three reasons this might occur. For each of the three reasons, explain the process and journal entries that would be made. Provide an example of a company purchase and the result of the underpayment.
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