Question 16

The acquisition method of accounting for a business combination is consistent with

Entity theory.

Proprietary theory.

Parent company theory.

Residual interest theory.

Question 17

Under the acquisition method of accounting for a business combination, restructuring costs are

Capitalized and amortized over a period not exceeding ten years.

Fees paid to lawyers and accountants to bring about the business combination.

Costs incurred to effect the business combination.

Treated as post acquisition expenses.

Question 19

Under the acquisition method of accounting for a business combination, goodwill is equal to

The acquired company's ability to generate excess profits.

The excess of the cost of the acquisition plus the fair value of the noncontrolling interest over the fair value of the acquiree's net assets.

The excess of the cost of the acquisition over the fair value of the acquiree's net assets.

The excess of the fair value of acquiree's net assets over the cost of acquisition.

Question 20

Under the acquisition method of accounting for a business combination, a bargain purchase is

Reported as goodwill in the balance sheet.

Tested annually for impairment.

Reported as a gain in the income statement.

Reported as an adjustment to other comprehensive income.