Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

Financial Accounting

3. Accrual Accounting Concepts

Revenue Recognition and Expense Recognition

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Multiple Choice

At the date of an acquisition which is not a bargain purchase, the acquisition method requires that:

goodwill is not recognized under any circumstances.

only the liabilities assumed are recognized at fair value, while assets are recorded at book value.

the identifiable assets acquired and liabilities assumed are recognized at their fair values.

the identifiable assets acquired and liabilities assumed are recognized at their historical cost.

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Verified step by step guidance

Understand the acquisition method: The acquisition method is a standard approach in accounting for business combinations. It requires that the identifiable assets acquired and liabilities assumed are recognized at their fair values at the acquisition date.

Clarify the concept of fair value: Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This ensures that the financial statements reflect the current market conditions.

Identify the treatment of goodwill: In acquisitions that are not bargain purchases, goodwill is recognized as the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill is not ignored; it is an important part of the acquisition accounting process.

Compare fair value and historical cost: Historical cost refers to the original purchase price of an asset, while fair value reflects the current market value. The acquisition method specifically requires fair value recognition, not historical cost.

Apply the acquisition method: To solve the problem, recognize that the correct approach under the acquisition method is to record the identifiable assets acquired and liabilities assumed at their fair values, ensuring compliance with accounting standards such as IFRS 3 or ASC 805.