Problem: Jones Corp issues 100,000 shares of its previously unissued shares of common stock for all of the outstanding stock of Smith and Smith is dissolved. Jones pays for the following costs and expenses related to this acquisition of Smith:
Registering and issuing securities
Accountants' and legal fees
Cost of closing duplicate facilities
Salaries of Jones' employees assigned to the implementation of the merger
Costs of shareholders' meeting to vote on the merger.
Under the acquisition method which of the following statements is correct?
1. All of the items listed above are treated as expenses of the purchase
2. All of the items listed above except the cost of registering and issuing the securities are expensed by the combined entity
3. Costs of registering and issuing the securities increase paid-in capital
4. Accountants' and legal fees would be part of consideration transferred