(TCO 2) In a transaction accounted for using the purchase method, where cost is less than fair value, which statement is true?

(TCO 2) In a transaction accounted for using the purchase method, where cost is less than fair value, which statement is true?

Negative goodwill is recorded.

A deferred credit is recorded.

Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as a deferred credit.

Long-term assets of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain.

Long-term assets and liabilities of the acquired company are reduced in proportion to their fair values. Any excess is recorded as an extraordinary gain.

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