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.

---

Definitions:

Average Total Cost Curve

A graph that shows the average total cost of producing different quantities of output, typically U-shaped, reflecting economies and diseconomies of scale.

Average Variable Cost Curve

The Average Variable Cost Curve graphically represents how a firm's variable costs (costs that change with the level of output) per unit of output change as the firm alters its level of production.

Fixed Costs

Costs that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Marginal Cost Curve

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