Mega Corporation Acquired 65% of the Voting Shares of Forko

question 17

Multiple Choice

Mega Corporation acquired 65% of the voting shares of Forko Ltd for €10 billion and used the purchase method of accounting for the merger.Mega Corporation's interest in Forko Ltd.had a restated value of €950 million.How should the difference be accounted for by Mega Corporation?

• A)As Gain from Acquisition on the current period income statement
• B)As Goodwill on the consolidated balance sheet
• C)As a Loss from Merger on the current period income statement
• D)As Additional Paid-in Capital on the consolidated balance sheet

---

Definitions:

Cost Behavior

The way in which a cost reacts to changes in the level of activity.

Fixed Cost

Costs that do not change with the level of production or output, remaining constant even as volume changes.

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid. Beyond this range, cost behaviors may change.

Per Unit Basis

A method of cost allocation or measurement that divides a total by the number of units to find the cost per unit.