D is corrent. In an acquisition, the difference between the cost of an acquired company and the fair value of its net identifiable assets (fair value of tangible and identifiable intangible assets less liabilities) is recorded as goodwill. The cost of the Cable Corp. is $1,600,000, and the fair value of its net assets is $1,300,000 ($160,000 + $460,000 + $1,040,000 - $360,000). Therefore, goodwill to be recorded is $300,000 ($1,600,000 - $1,300,000).
A is incorrect. In an acquisition, the difference between the cost of an acquired company and the fair value of its net identifiable assets (fair value of tangible and identifiable intangible assets less liabilities) is recorded as goodwill.
B is incorrect. It incorrectly subtracts the carrying value of the assets from the acquisition cost ($1,600,000 - (160,000 + 480,000 + 960,000) = 0). In an acquisition, the difference between the cost of an acquired company and the fair value of its net identifiable assets (fair value of tangible and identifiable intangible assets less liabilities) is recorded as goodwill.
C is incorrect because it incorrectly subtracts the carrying value of the net assets ($1,600,000 - (160,000 + 480,000 + 960,000 - 360,000) = $360,000) from the acquisition cost rather than subtracting the fair value of the net asset from the acquisition cost.
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