ExpertMedium1 markMultiple Choice
CPA · Question 18 · Area II: Technical Accounting
Under ASC 805, which of the following costs incurred in a business combination should be capitalized as part of the consideration transferred?
Under ASC 805, which of the following costs incurred in a business combination should be capitalized as part of the consideration transferred?
Answer options:
A.
Legal and advisory fees
B.
Costs to register and issue equity securities
C.
General administrative costs of the acquisition department
D.
None of the above
How to approach this question
Recall the treatment of acquisition costs: Direct costs (legal, consulting) -> Expense. Stock issuance costs -> Reduce APIC. Debt issuance costs -> Deferred charge/discount. None are capitalized to Goodwill.
Full Answer
D.None of the above✓ Correct
D
ASC 805 requires that acquisition-related costs (finder's fees, advisory, legal, accounting, valuation) be expensed in the period incurred. Costs to issue debt or equity securities are recognized in accordance with other applicable GAAP (usually as a reduction of the proceeds). They are NOT part of the consideration transferred.
Common mistakes
Capitalizing legal fees to Goodwill.
Practice the full CPA BAR Practice Exam 5
50 questions · hints · full answers · grading
More questions from this exam
Q01Orion Manufacturing is analyzing its working capital efficiency. For the current year, Orion repo...HardQ02Vanguard Corp. uses a standard costing system. For the month of June, the following data is avail...HardQ03Titan Industries is evaluating a new project with the following projected cash flows:<br/>- Initi...MediumQ04Under ASC 606, which of the following scenarios BEST describes a performance obligation that is s...MediumQ05Blue City's General Fund reported the following for the fiscal year:<br/>- Property taxes levied:...Hard