Question

In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method, how should stock issuance costs and direct combination costs be treated? Multiple Choice Stock issuance costs and direct combination costs are expensed as incurred. Direct combination costs are ignored, and the stock issuance costs result in a reduction to additional paid-in capital. Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital. Both are treated as part of the acquisition consideration transferred. Both reduce additional paid-in capital.

Answer 1

In a business combination where a subsidiary retains its incorporation and which is accounted for under the acquisition method, how should stock issuance costs and direct combination costs be treated Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital.

So answer is c) Direct combination costs are expensed as incurred and stock issuance costs result in a reduction to additional paid-in capital