It's Not Unusual for One Company to Buy Another Company

question 80

Essay

It's not unusual for one company to buy another company in order to obtain technology that the acquired company has developed or is in the process of developing.
Required:
Explain the accounting treatment of purchased technology.

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Definitions:

NAFTA

The North American Free Trade Agreement, a treaty between the United States, Canada, and Mexico that eliminated most tariffs and trade barriers between the countries.

Comparative Advantage

The ability of an entity to produce a good or service at a lower opportunity cost than others.

Accounting Services

Professional services that include bookkeeping, audit, tax preparation, financial analysis, and consultancy related to financial management.

Offshoring

The practice of moving a part of a company's operations or business processes to another country to reduce costs or take advantage of favorable conditions.