How Should the Acquisition Cost of a Business Combination Be

question 34

Multiple Choice

How should the acquisition cost of a Business Combination be allocated prior to preparing Consolidated Financial Statements?

• A) The difference between the acquisition cost and the book values of the acquirer's identifiable assets should be treated as goodwill.
• B) The acquisition cost should be allocated to the acquired company's identifiable assets and liabilities to bring them to their fair value.
• C) The acquisition cost should be reflected as an increase in the acquirer's Investment (in the subsidiary) account.
• D) The treatment of the acquisition cost depends largely on the type of consideration given by the acquirer.

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Definitions:

Managerial

Pertaining to the activities, responsibilities, and skills of managers in an organization, focusing on effective planning, organizing, leading, and controlling.

Financial Accounting

The field of accounting focused on the summary, analysis, and reporting of financial transactions pertaining to a business.

Qualitative Data

Non-numerical information that describes characteristics, attributes, or properties of objects, people, or events.

Timeframe

A specific period of time in which something is supposed to happen or tasks are expected to be completed.