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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