If the Cost of a Business Combination Is Greater Than

question 25

Multiple Choice

If the cost of a business combination is greater than the acquired interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree:

• A) a gain on bargain purchase results
• B) goodwill has been acquired and must be recognised
• C) the difference is treated as a special equity reserve in the acquirer's accounting records
• D) the difference is treated as a loss and immediately charged to profit or loss of the period in which the business combination occurred.

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Definitions:

Average Total Cost

The total cost divided by the quantity of output produced, representing the average cost per unit of output.

Short-Run Supply Curve

A graphical representation showing the quantity of a good or service that producers are willing and able to sell at different prices over a short period, holding other factors constant.

Marginal Cost Curve

A graphical representation that shows how the cost of producing one more unit of a good changes as the production volume changes.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced, representing the variable cost per unit of output.