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.

Learn about the use and limitations of Gantt charts in illustrating project timelines and activity relationships.

Comprehend the implications of activity duration on project scheduling and the critical path.

Appreciate the unique characteristics of projects compared to traditional activities.

Identify the differences between PERT and CPM in project management.

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Definitions:

Manufacturing Overhead

All indirect costs associated with the production process, such as utilities, quality control, and maintenance expenses.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials, labor, and manufacturing overhead.

Balance Sheet

The balance sheet is a financial statement that shows a company’s assets, liabilities, and shareholder equity at a specific point in time.

Spreadsheet

A software application that allows users to organize, analyze, and store data in tabular form.