The appropriate accounting treatment for incremental costs directly attributable to an equity transaction that would otherwise have been avoided is to:
A) deduct from equity, net of tax;
B) add to equity, net of tax;
C) expense in the period incurred;
D) defer as a contingent asset.

Question

Quizplus · Accepted Answer

Incremental costs directly attributable to an equity transaction that would otherwise have been avoided are deducted from equity, net of tax. This is because these costs are considered to be directly related to the equity transaction and thus reduce the amount of proceeds credited to equity.

The Appropriate Accounting Treatment for Incremental Costs Directly Attributable to an Equity