How Are Stock Issuance Costs and Direct Combination Costs Treated

question 4

Multiple Choice

How are stock issuance costs and direct combination costs treated in a business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation?

• A) Stock issuance costs are a part of the acquisition costs, and the direct combination costs are expensed.
• B) Direct combination costs are a part of the acquisition costs, and the stock issuance costs are a reduction to additional paid-in capital.
• C) Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in capital.
• D) Both are treated as part of the acquisition consideration transferred.
• E) Both are treated as a reduction to additional paid-in capital.

---

Definitions:

Natural Environment

The physical, chemical, and biological systems and conditions that exist on Earth, not including the built environment or human interventions.

Millennium Development Goals

A set of eight international development goals that were established to address global issues such as poverty, education, and health by 2015.

UN-Sponsored

Refers to initiatives or programs that are endorsed, funded, or implemented by the United Nations or its agencies.

Time-Bound

Refers to a specific duration in which an objective or project must be completed.