In Testing Acquisitions the Auditor Needs to Understand the Appropriate

question 63

Multiple Choice

In testing acquisitions the auditor needs to understand the appropriate accounting guidance related to acquisition accounting. Which of the following is NOT an accounting consideration for the auditor as regards to acquisition cost?

• A) Inclusion of material transportation and installation costs
• B) Recording of trade-in costs
• C) Allocating costs when building and equipment are purchased at one price
• D) Verifying that purchased equipment amounts correspond to the budgeted amount

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Definitions:

Profit Margin

A financial metric that measures the amount of net earnings a company makes as a proportion of its sales.

Return On Common Stockholders' Equity

A measure of the profitability of a corporation in terms of the returns generated on the equity investment of the common shareholders.

Net Sales

Net sales represent the revenue a company generates from its business activities, after subtracting returns, allowances for damaged goods, and discounts.

Gross Profit

The financial metric representing the difference between a company's net sales and the cost of goods sold, indicating the basic profitability of products.