Which of the following is incorrect regarding accounting for acquisitions?
A) Goodwill resulting from an acquisition may not be amortized.
B) Companies use the purchase method for accounting for acquisitions.
C) Additional paid in capital is the excess of what the acquirer paid for the target that could not be accounted for in fair market value.
D) The acquirer assumes all the assets and liabilities of the target and all operating results from the date of acquisition going forward.

Question

Quizplus · Accepted Answer

Additional paid-in capital refers to the amount of capital that is paid in by investors above the par value of the shares, not the excess of what the acquirer paid for the target that could not be accounted for in fair market value. This excess is typically recorded as goodwill in the context of acquisitions.

Which of the Following Is Incorrect Regarding Accounting for Acquisitions