Which of the following observations is(are)consistent with the acquisition method of accounting for business combinations?
I.Expenses related to the business combination are expensed.
II.Stock issue costs are treated as a reduction in the issue price.
III.All merger and stock issue costs are expensed.
IV.No goodwill is ever recorded.

Question

Quizplus · Accepted Answer

The acquisition method of accounting for business combinations requires that expenses related to the business combination are expensed, and stock issue costs are treated as a reduction in the issue price. However, goodwill is always recorded under this method, so option IV is incorrect. Option III is also incorrect as not all merger and stock issue costs are expensed. Therefore, the correct option is C, which includes observations I and II, and is consistent with the acquisition method of accounting for business combinations.

Which of the Following Observations Is(are)consistent with the Acquisition Method