Fun with Florals Corporation Acquired All the Voting Common Stock

question 106

Multiple Choice

Fun with Florals Corporation acquired all the voting common stock shares of Crafts-to-Go Corporation under the acquisition method.Crafts-to-Go remains a separate corporation.Which of the following statements about the financial statements is true?

• A)The assets and liabilities of Crafts-to-Go Corporation would be not revalued and disclosed at fair value on the date of acquisition.
• B)Fun with Florals will use the equity method of accounting for this investment.
• C)Fun with Florals will prepare consolidated financial statements.
• D)Fun with Florals will use the fair value method of accounting for this investment.

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Definitions:

Long Run

A period of time in economics during which all factors of production and costs are variable, allowing full adjustment to changes.

Average-Total-Cost Curve

A graphical representation in economics that shows how the average total cost of production changes as the quantity of output is altered.

Marginal Cost

The elevation in costs incurred by the creation of an additional unit of a good or service.

Long-Run Equilibrium

A state in which all factors of production and economic inputs can be fully adjusted, and all market forces are balanced.