Flashcards: Business Combinations

Lion Company pays $10 million for all outstanding shares of Tiger Company. On the date of the purchase, Tiger company has net identifiable assets with a book value of $8 million and a fair value of $8.5 million. Which of the following statements is true?

Goodwill of $2 million should be reported for consolidation purposes and amortized over a period of time

Goodwill of $1.5 million should be reported for consolidation purposes and amortized over a period of time

Goodwill of $2 million should be reported for consolidation purposes and tested annually for impairment

Goodwill of $1.5 million should be reported for consolidation purposes and tested annually for impairment

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