In purchase accounting, a cost incurred can be added to the cost of the acquisition only if the cost can be directly traced to the acquisition.

Question

Quizplus · Accepted Answer

In purchase accounting, only costs that can be directly attributed to the acquisition process, such as legal fees, due diligence costs, and valuation expenses, can be added to the cost of the acquisition. This is because these costs are directly related to acquiring the asset and can be capitalized as part of the acquisition cost.

In Purchase Accounting, a Cost Incurred Can Be Added to the Cost