Final answer:
A bargain purchase consolidation differs from a normal consolidation in the elimination entry that records the gain on bargain purchase, often referred to as "negative goodwill", which is credited directly to the income statement due to the acquisition price being less than fair value of net assets.
Step-by-step explanation:
In the context of business growth and expansion, specifically dealing with mergers and acquisitions (M&A), a bargain purchase consolidation is a situation where a company acquires another company for less than the fair market value of its net assets. In a normal consolidation following a merger or acquisition, the purchase price is allocated to the assets acquired and liabilities assumed, based on their fair values, and any excess purchase price is recorded as goodwill. However, in a bargain purchase, the purchase price is less than the fair value of the assets minus liabilities, leading to a "negative goodwill" situation, which requires a different elimination entry in the consolidation process.
The appropriate journal entries in a bargain purchase consolidation involve debiting various asset accounts and crediting liabilities to adjust their balances to the fair values, debiting cash or other consideration transferred, and the excess of fair value over the purchase price (negative goodwill) is credited directly to gain on bargain purchase. In contrast, additional elimination entries in a normal consolidation would include debiting the investment in the subsidiary and crediting goodwill or the parent's equity in the subsidiary, balancing the intercompany transactions, and eliminating the subsidiary's equity accounts.