Ch. 2 Advanced – Flashcards
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Direct combination costs and stock issuance costs are often incurred in the process of making a controlling investment in another company. How should those costs be accounted for in a pre-2009 purchase transaction?
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Option B: Increase Investment>>>> Decrease Paid-in-Capital
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How are direct and indirect costs accounted for when applying the acquisition method for a business combination?
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Option A: Expensed>>>>Expensed
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What is the primary accounting difference between accounting for when the subsidiary is dissolved and when the subsidiary retains its incorporation?
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If the subsidiary retains its incorporation, the consolidation is not formally recorded in the accounting records of the acquiring company
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Which one of the following is a characteristic of a business combination accounted for as an acquisition?
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The transaction establishes an acquisition fair value basis for the company being acquired
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Acquired in-process research and development is considered as:
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An indefinite-lived asset subject to testing for impairment
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An example of a difference in types of business combination is:
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A statutory merger requires dissolution of the acquired company while a statutory consolidation does not require dissolution
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According to GAAP, the pooling of interest method for business combinations
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Is no longer allowed for business combinations after June 30, 2001
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Which one of the following is a characteristic of a business combination that is
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Fair value for the consideration transferred by the acquirer as well as the fair value of items received by the acquirer can enter into the determination of the acquirer's accounting valuation of the acquired company
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A statutory merger is a(n)
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Business combination in which only one of the two companies continues to exist as a legal corporation
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How are stock issuance costs and direct combination costs treated in a business combination which is accounted for as an acquisition when the subsidiary will retain its incorporation?
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Direct combination costs are expensed and stock issuance costs are a reduction to additional paid-in-capital
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