In a Step Acquisition, Which of the Following Statements Is

question 17

Multiple Choice

In a step acquisition, which of the following statements is false?

• A) The acquisition method views a step acquisition essentially the same as a single step acquisition.
• B) Income from subsidiary is computed by applying a partial year for a new purchase acquired during the year.
• C) Income from subsidiary is computed for the entire year for a new purchase acquired during the year.
• D) Obtaining control through a step acquisition is a significant measurement event.
• E) Pre-acquisition earnings are not included in the consolidated income statement.

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Definitions:

Liquid Assets

Assets that can be quickly converted into cash without significant loss of value, facilitating financial flexibility.

Plant and Equipment

Tangible long-term assets owned by a business, used in the production or supply of goods and services.

Goodwill

An intangible asset that arises when a business is acquired for more than its fair market value, reflecting factors like reputation, brand, and customer loyalty.

Net Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity and operational efficiency of the business.