In a Business Combination Accounted for as an Acquisition, How

question 32

Multiple Choice

In a business combination accounted for as an acquisition, how should the excess of fair value of net assets acquired over the consideration paid be treated?

• A) Amortized as a credit to income over a period not to exceed forty years.
• B) Amortized as a charge to expense over a period not to exceed forty years.
• C) Amortized directly to retained earnings over a period not to exceed forty years.
• D) Recorded as an ordinary gain.

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Definitions:

Special Order

An order for goods or services that is outside the company's normal production or service offerings, often requiring special pricing or terms.

Financially Better

A state or condition where financial health, performance, or position has improved or is superior to a previous state or to another entity's state.

Total Contribution Margin

The difference between total sales revenue and total variable costs, indicating how much revenue contributes toward covering fixed costs and generating profit.

Machine Hours

A measure of production output or activity based on the number of hours machines are operated.