Troy Company notified Kline Companys shareholders that it was interested in purchasing controlling ownership of Kline and offered to exchange one share of Troys common stock for each share of Kline Company submitted by July 31, 20X7. At the time of the offer, Troys shares were trading for $35 per share and Klines shares were trading at $28. Troy acquired all of the shares of Kline prior to December 31, 20X7, and transferred Klines assets and liabilities to its books. In addition to issuing its shares, Troy paid a finders fee of $200,000, stock registration and audit fees of $60,000, legal fees of $90,000 for transferring Klines assets and liabilities to Troy, and $370,000 in legal fees to settle litigation brought by Klines shareholders who alleged that the offering price was below the per-share fair value of Klines net assets.

Required Troy Companys 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. Support your recommendations with citations and quotations from the authoritative financial reporting standards or other literature.