Under the Acquisition Method of Accounting for a Business Combination

question 12

Multiple Choice

Under the acquisition method of accounting for a business combination, a bargain purchase is

• A) Reported as goodwill in the balance sheet.
• B) Tested annually for impairment.
• C) Reported as a gain in the income statement.
• D) Reported as an adjustment to other comprehensive income.

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Definitions:

Risk Tolerance

An individual's or financial entity's capacity to endure loss or volatility in investment value while attempting to achieve investing goals.

Weighted Average Cost

A calculation that takes into account the various costs of goods based on their relative weights, to arrive at an average cost per unit.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision, representing the benefits that could have been received but were sacrificed in the pursuit of another option.