When a Parent Uses the Acquisition Method for Business Combinations

question 67

Multiple Choice

When a parent uses the acquisition method for business combinations and sells shares of its subsidiary, which of the following statements is false?

• A) If majority control is still maintained, consolidated financial statements are still required.
• B) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated financial statements are not required.
• C) If majority control is not maintained but significant influence exists, the equity method is still used to account for the investment and consolidated financial statements are still required.
• D) If majority control is not maintained and significant influence no longer exists, a prospective change in accounting principle to the fair value method is required.
• E) A gain or loss calculation must be prepared if control is lost.

Grasp the implications of different cost industries (increasing, decreasing, and constant-cost industries) on the long-run supply curve.

Identify the characteristics and outcomes of purely competitive markets in long-run equilibrium.

Recognize the role of marginal cost, average total cost, and price in achieving productive and allocative efficiency.

Understand the significance of maximizing consumer surplus and producer surplus in economic welfare.

---

Definitions:

Socially Approved

Regarded or accepted by society as being correct, appropriate, or beneficial.

Selfish Manner

Acting with concern for one's own welfare or advantage at the expense of or without regard for others.

Agreeing

The act of sharing the same opinion or position as someone else.

Anecdotal Evidence

Evidence based on personal accounts, observations, or stories, rather than on systematic scientific evaluations.