Assignment of Acquisition CostsTroy Company notified Kline Company's shareholders that...

Assignment of Acquisition Costs

Troy Company notified Kline Company's shareholders that it was interested in purchasing controlling ownership of Kline and offered to exchange one share of Troy's common stock for each share of Kline Company submitted by July 31, 2007. At the time of the offer, Troy's shares were trading for $35 per share and Kline's shares were trading at $28. Troy acquired all of the shares of Kline prior to December 31, 2007, and transferred the assets and liabilities of Kline to its books. In addi­tion to issuing its shares, Troy paid a finder's fee of $200,000, stock registration and audit fees of $60,000, legal fees of $90,000 for transferring Kline's assets and liabilities to Troy, and $370,000 in legal fees to settle litigation brought by Kline's shareholders who alleged that the offering price was below the per share fair value of Kline's net assets.

Troy is currently negotiating to purchase Lad Company through an exchange of common stock and expects to incur additional costs comparable to those involved in the acquisition of Kline. The acquisition of Lad is expected to close sometime late in 2009.

Required

Troy Company's vice president of finance has asked you to review the current accounting literature, including authoritative pronouncements, and prepare a memo reporting the required treatment of the additional costs at the time Kline Company was acquired and the current requirements for reporting the additional costs of acquiring Lad Company. Support your recommendations with cita­tions and quotations from the authoritative financial reporting standards or other literature.