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For Each of the Following Situations, Select the Best Letter

Question 117

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For each of the following situations, select the best letter answer to reflect the effect of the numbered item on the acquirer's accounting entry at the date of combination when separate incorporation will be maintained. Items (4) and (6) require two selections.

Premises:
Contingent consideration.
In-process research and development acquired.
Bargain purchase.
Stock issue costs.
Indirect costs.
Direct costs.
Responses:
Increase Common stock.
Increase Investment account.
Decrease common stock.
Increase Additional paid-in capital.
Increase Retained earnings.
Decrease Investment account.
Decrease Additional paid-in capital.
Decrease Retained earnings.
Increase Liabilities.

Correct Answer:

Increase Common stock.
Increase Investment account.
Decrease common stock.
Increase Additional paid-in capital.
Increase Retained earnings.
Decrease Investment account.
Decrease Additional paid-in capital.
Decrease Retained earnings.
Increase Liabilities.
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