Acquisition Costs Such as the Fees of Accountants and Lawyers

question 11

Multiple Choice

Acquisition costs such as the fees of accountants and lawyers that were necessary to negotiate and consummate the purchase are

• A)​recorded as a deferred asset and amortized over a period not to exceed 15 years
• B)​expensed if immaterial but capitalized and amortized if over 2% of the acquisition price
• C)​expensed in the period of the purchase
• D)​included as part of the price paid for the company purchased

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Definitions:

Operating Lease

A lease agreement for the use of an asset without transferring ownership, typically involves short-term leases of equipment or property.

Fair-Market Value

An estimate of the market value of a property or asset, based upon what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller in the market.

CICA

Canadian Institute of Chartered Accountants, an organization for accounting professionals in Canada. (Note: as of 2023, CICA has amalgamated into CPA Canada).

Financial Lease

A lease arrangement where the lessee pays for the use of an asset over a long period, essentially covering its full cost, similar to de facto ownership.