Question

current assets of the acquired firm. 5. What is the appropriate accounting treatment for the value assigned to in process research and devel- opment acquired in a business combination? a. Expense upon acquisition. b. Capitalize as an asset. C Expense if there is no alternative use for the assets used in the research and development and technological feasibility has yet to be reached. d. Expense until future economic benefits become certain and then capitalize as an asset 6. An acquired entity has a long-term operating lease for an office building used for central manase ment. The terms of the lease are very favorable relative to current market rates. However, the lease prohibits subleasing or any other transfer of rights. In its financial statements, the acquiring firm should report the value assigned to the lease contract as a. An intangible asset under the contractual-legal criterion b. A part of goodwill. c. An intangible asset under the separability criterion. d. A building. 7. When does gain recognition accompany a business combination? a. When a bargain purchase occurs. b. In a combination created in the middle of a fiscal year. c. In an acquisition when the value of all assets and liabilities cannot be determined. d. When the amount of a bargain purchase exceeds the value of the applicable noncurrent assets (other than certain exceptions) held by the acquired company. 8. According to the acquisition method of accounting for business combinations, costs paid to attorneys and accountants for services in arranging a merger should be a. Capitalized as part of the overall fair value acquired in the merger. b. Recorded as an expense in the period the merger takes place.

5 through 8

Answer 1

Question 5
B. This statement is correct.
Because,
Development research in this process is a technology that is a priority in development as an acquisition, which is not possible at present and there is no alternative use in the future. As the generally accepted accounting features make it possible to capitalize assets that are not possible through the development of technology, the research and development costs increase the present.

Question 6
A. This statement is correct.
An intangible asset is a permanent operating lease for a building used for company management, pursuant to a contractual entity. Leases are relatively friendly in current markets. Return, transfer of any other rights in the lease is strictly prohibited. Therefore, the company acquired in its financial account must pay the mortgage offered or given on the lease agreement

Question 7
A. This statement is correct.
At which point the acquisition cannot determine all the capital and responsibility of the company. Therefore, when a business is purchased in the intermediate combination between financial year starts. In such an acquisition when one cannot fully assess the business liabilities. At such time the amount of the purchase will be higher than the value of the applicable capital stock held by the company.

Question 8.
B. This statement is correct. Because,
According to the accounting method for any business management pair, the accounting test costs paid to the accountants for the merger arrangements are recorded as expenses during the merger period.