3. For each of the following situations, select the best letter answer to reflect the effect...

3. 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.

(A) Increase Investment account.

(B) Decrease Investment account.

(D) Increase Common stock.

(E) Decrease common stock.

(F) Increase Additional paid-in capital.

(G) Decrease Additional paid-in capital.

(H) Increase Retained earnings

(I) Decrease Retained earnings

_____1. Direct costs.

_____2. Indirect costs.

_____3. Stock issue costs.

_____4. Contingent consideration.

_____5. Bargain purchase.

_____6. In-process research and development acquired.

Solutions

Expert Solution

1. Direct costs. (E) Decrease common stock.

2. Indirect costs. - I (Decrease Retained Earnings)

3. Stock issue costs. - G (Decrease Additional paid-in capital)

4. Contingent consideration. - C (Increase Liabilities) and B (Decrease Investment account)

5. Bargain purchase. - H (Increase Retained earnings)

6. In-process research and development acquired.- (A) Increase Investment account. and G (Decrease Additional paid-in capital)

ekkarill92 answered 1 year ago

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