One Company Is Considering Entering into a Business Combination with Another

question 42

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.
• D) No, this would not be possible under any circumstances.

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Definitions:

Standard Deviation

A measure of the amount of variation or dispersion in a set of values, indicating how much the values deviate from the mean.

Dispersed

Spread out over a wide area; not concentrated in one place.

Grade Distribution

The spread of grades given for a specific academic assessment, typically shown as a frequency distribution.

Chebyshev's Theorem

A statistical rule that gives a minimum proportion of observations that fall within a specified number of standard deviations from the mean, for any distribution.