Under the New-Entity Method, Which of the Following Statements Is

question 19

Multiple Choice

Under the new-entity method, which of the following statements is TRUE?

• A) The net assets of the acquiring company remain at book value while those of the acquired company are recorded at fair value.
• B) The net assets of the acquiring company are recorded at fair value while those of the acquired company are recorded at book value.
• C) The net assets of both companies are recorded at fair market value.
• D) The net assets of both companies are recorded at book value.

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Definitions:

Price Variance

The difference between the actual cost of a good or service and its expected or budgeted cost.

Quantity Variance

The difference between the actual quantity of materials or labor used in production and the expected (or standard) quantity, affecting cost and efficiency.

Direct Labor Price Variance

The difference between the expected cost of direct labor and the actual cost incurred.

Standard Hours

The predetermined amount of time expected to be required to complete a task or produce a unit of product under normal conditions.