If the Total Acquisition Value of an Acquired Not-For-Profit Entity

question 41

Multiple Choice

If the total acquisition value of an acquired not-for-profit entity is greater than the fair value of all identifiable net assets of the entity, and that entity's revenues are not generated by rendering goods or services or from membership dues, then the excess of acquisition value over identifiable net assets is immediately reported:

• A) As goodwill on the consolidated Statement of Position.
• B) As a pro-rata increase to the identifiable assets and liabilities acquired.
• C) As a direct reduction in unrestricted net assets on the Statement of Financial Position.
• D) As a reduction in unrestricted net assets on the Statement of Activities.
• E) As an increase in other assets on the Statement of Financial Position.

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Definitions:

Book Depreciation Expense

The systematic allocation of the cost of a tangible asset over its useful life for accounting purposes, as reflected in the financial statements.

Warranty Expense

Costs incurred by a company for repairing, replacing, or refunding products under warranty, considered a contingent liability until incurred.

Unrealized Loss

A loss that results from holding onto an asset that has decreased in price, but has not yet been sold.

Tax Rate

The rate at which the government imposes taxes on the income or earnings of a person or a company.