WGU D425: ADVANCED FINANCIAL
ACCOUNTING COMPREHENSIVE EXAM
QUESTIONS WITH VERIFIED ANSWERS
2026/2027.
1. Under the acquisition method, how should a parent company account for the acquisition-
related costs, such as legal and finder’s fees?
A. Capitalize as part of the investment in the subsidiary
B. Expensed in the period in which the costs are incurred
C. Deducted from the fair value of the consideration transferred
D. Amortized over a period not to exceed 40 years
Answer: B
Conceptual Explanation: According to ASC 805, acquisition-related costs are not
considered part of the fair value exchange between the buyer and seller and must be
expensed as incurred.
2. When a bargain purchase occurs in a business combination, how is the excess of fair value
of net assets over the consideration transferred recognized?
A. As a deferred credit to be amortized over 5 years
B. As a credit to Goodwill
,C. As an increase to Additional Paid-in Capital
D. As a gain in the income statement of the period
Answer: D
Conceptual Explanation: A bargain purchase occurs when the fair value of the identifiable
net assets acquired exceeds the consideration transferred. This difference is recognized as
a gain on the acquisition date.
3. In a business combination, which of the following is true regarding the valuation of the
Non-controlling Interest (NCI)?
A. It is measured at fair value at the date of acquisition
B. It is valued at the parent’s cost of acquisition
C. It is always valued at the book value of the subsidiary
D. It is not recognized if the parent owns more than 80%
Answer: A
Conceptual Explanation: The acquisition method requires the NCI to be measured at fair
value at the acquisition date, which includes the NCI’s share of the fair value of identifiable
net assets and any goodwill allocated to it.
, 4. Company A acquires 100% of Company B. On the date of acquisition, Company B has
equipment with a book value of $100,000 and a fair value of $150,000. In the consolidated
balance sheet, what value is reported for this equipment?
A. $100,000
B. $125,000
C. $150,000
D. $250,000
Answer: C
Conceptual Explanation: In a 100% acquisition, the assets of the subsidiary are recorded
at their full fair value on the consolidated financial statements at the date of acquisition.
5. Which of the following describes the ‘Measurement Period’ in a business combination?
A. The period after acquisition, not exceeding one year, to finalize fair value estimates
B. The time taken to negotiate the purchase price
C. The useful life of the goodwill acquired
D. The time between the announcement and the closing of the deal
Answer: A
Conceptual Explanation: The measurement period is the period after the acquisition date
during which the acquirer may adjust the provisional amounts recognized if new
ACCOUNTING COMPREHENSIVE EXAM
QUESTIONS WITH VERIFIED ANSWERS
2026/2027.
1. Under the acquisition method, how should a parent company account for the acquisition-
related costs, such as legal and finder’s fees?
A. Capitalize as part of the investment in the subsidiary
B. Expensed in the period in which the costs are incurred
C. Deducted from the fair value of the consideration transferred
D. Amortized over a period not to exceed 40 years
Answer: B
Conceptual Explanation: According to ASC 805, acquisition-related costs are not
considered part of the fair value exchange between the buyer and seller and must be
expensed as incurred.
2. When a bargain purchase occurs in a business combination, how is the excess of fair value
of net assets over the consideration transferred recognized?
A. As a deferred credit to be amortized over 5 years
B. As a credit to Goodwill
,C. As an increase to Additional Paid-in Capital
D. As a gain in the income statement of the period
Answer: D
Conceptual Explanation: A bargain purchase occurs when the fair value of the identifiable
net assets acquired exceeds the consideration transferred. This difference is recognized as
a gain on the acquisition date.
3. In a business combination, which of the following is true regarding the valuation of the
Non-controlling Interest (NCI)?
A. It is measured at fair value at the date of acquisition
B. It is valued at the parent’s cost of acquisition
C. It is always valued at the book value of the subsidiary
D. It is not recognized if the parent owns more than 80%
Answer: A
Conceptual Explanation: The acquisition method requires the NCI to be measured at fair
value at the acquisition date, which includes the NCI’s share of the fair value of identifiable
net assets and any goodwill allocated to it.
, 4. Company A acquires 100% of Company B. On the date of acquisition, Company B has
equipment with a book value of $100,000 and a fair value of $150,000. In the consolidated
balance sheet, what value is reported for this equipment?
A. $100,000
B. $125,000
C. $150,000
D. $250,000
Answer: C
Conceptual Explanation: In a 100% acquisition, the assets of the subsidiary are recorded
at their full fair value on the consolidated financial statements at the date of acquisition.
5. Which of the following describes the ‘Measurement Period’ in a business combination?
A. The period after acquisition, not exceeding one year, to finalize fair value estimates
B. The time taken to negotiate the purchase price
C. The useful life of the goodwill acquired
D. The time between the announcement and the closing of the deal
Answer: A
Conceptual Explanation: The measurement period is the period after the acquisition date
during which the acquirer may adjust the provisional amounts recognized if new
