One Company Acquires Another Company in a Combination Accounted for Under

question 39

Multiple Choice

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision?

• A) It is the only method allowed by the SEC.
• B) It is relatively easy to apply.
• C) It is the only internal reporting method allowed by generally accepted accounting principles.
• D) Operating results on the parent's financial records reflect consolidated totals.
• E) When the equity method is used, no worksheet entries are required in the consolidation process.

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Definitions:

Open Door Policy

A foreign policy principle proposed by the United States in the late 19th and early 20th centuries advocating for equal trading rights among nations in China.

Imperialist Powers

Countries that extend their power and influence through colonization, use of military force, or other means.

Nationalist Leader

A person who promotes the interests, culture, or independence of their nation, sometimes leading a movement or party.

Emilio Aguinaldo

A Filipino revolutionary, politician, and military leader who is considered to be the first and the youngest President of the Philippines and led Filipino forces during the Spanish-American War and the Philippine-American War.