Which of the following statements is true regarding the acquisition method of accounting for a business combination?

Multiple Choice

• Net assets of the acquired company are reported at their fair values.
• Net assets of the acquired company are reported at their book values.
• Any goodwill associated with the acquisition is reported as a development cost.
• The acquisition can only be effected by a mutual exchange of voting common stock.
• Indirect costs of the combination reduce additional paid-in capital.