If a Parent Company Acquires Wholly Owned Subsidiary at an Amount

question 48

Multiple Choice

If a parent company acquires wholly owned subsidiary at an amount greater than the book value, the excess should be

• A)allocated to expense on the date of acquisition.
• B)allocated to identifiable assets to the extent of their fair values, with any remainder allocated to goodwill.
• C)allocated to goodwill, with any remainder allocated to the identifiable assets.
• D)set up as a liability to the controlling interest.

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Definitions:

Bargain Purchase Option

A clause in a lease agreement that allows the lessee to purchase the leased asset at the end of the lease term at a price significantly lower than the expected fair market value.

Liabilities Section

Part of a balance sheet that lists what a company owes, including debts, loans, and other financial obligations.

Classified Balance Sheet

A financial statement that separates a company's assets and liabilities into current and long-term categories, providing a detailed snapshot of the company's financial position.

Account Balances

The total amount of money in an account, calculated as the sum of all credits minus the sum of all debits.