How Should the Acquisition Cost of a Business Combination Be

question 3

Multiple Choice

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

• A) The acquisition cost should be allocated to the acquiree's book value.
• 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.