Which of the Following Statements Is True Regarding the Acquisition

question 47

Multiple Choice

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

• A) Net assets of the acquired company are reported at their fair values.
• B) Net assets of the acquired company are reported at their book values.
• C) Any goodwill associated with the acquisition is reported as a development cost.
• D) The acquisition can only be effected by a mutual exchange of voting common stock.
• E) Indirect costs of the combination reduce additional paid-in capital.

---

Definitions:

Segment Assets

Assets that are allocated to a company's operational segments or divisions for the purpose of financial reporting.

Price/Earnings Ratio

A valuation metric for a company that measures its current share price relative to its per-share earnings.

Preferred Dividends

Payments made to preferred shareholders, often at a fixed rate, that take precedence over dividends to common shareholders.

Common Dividends

Profits distributed to shareholders of common stock, reflecting the company's earnings and financial health.