In a Business Combination Where a Subsidiary Retains Its Incorporation

question 74

Multiple Choice

In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method, how should stock issuance costs and direct combination costs be treated?

• A) Stock issuance costs and direct combination costs are expensed as incurred.
• B) Direct combination costs are ignored, and the stock issuance costs result in a reduction to additional paid-in capital.
• C) Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital.
• D) Both are treated as part of the acquisition consideration transferred.
• E) Both reduce additional paid-in capital.

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Definitions:

Molarity

A measure of concentration expressed as the number of moles of a solute per liter of solution.

Diluted

The process of reducing the concentration of a solute in a solution, typically by adding more solvent.

Molarity

A concentration measure of a solution, represented by the number of moles of solute per liter of solution.

Solution

A homogeneous mixture composed of two or more substances, where the solute is uniformly dispersed within the solvent.