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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