One Company Is Considering Entering into a Business Combination with Another

question 24

Multiple Choice

One company is considering entering into a business combination with another. The potential acquirer wishes to acquire the subsidiary's assets and liabilities but wishes to prepare Consolidated Financial Statements using the Fair Market Values of its own assets and liabilities as well of those of its potential subsidiary. Can this be accomplished? (Assume that each of the methods is allowable)

• A) Yes, this is permissible under the Acquisition method.
• B) Yes, this is permissible under the Purchase Method under certain circumstances.
• C) Yes, this is permissible under the New Entity Method is used.
• D) No, this would not be possible under any circumstances.

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Definitions:

Engagement Ring

A ring given during a proposal of marriage to symbolize intent and commitment.

Heirs

Individuals legally entitled to receive assets from a deceased person's estate.

Misplaced

Refers to something that is in the wrong position or location.

iPhone

A brand of smartphones designed and marketed by Apple Inc., operating on iOS software.