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.

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Definitions:

Penile Erection

The physiological response wherein the penis becomes firm and enlarged due to increased blood flow, typically associated with sexual arousal.

Nitric Oxide

A gaseous molecule involved in various bodily functions, including blood vessel dilation and neurotransmission, playing a key role in sexual arousal.

Mons Veneris

The pubic mound; literally, “mountain of Venus.” Also known as mons pubis.

Labia Minora

Two small folds of skin within the labia majora that meet above the clitoris to form the clitoral hood. Also known as inner lips.