If a Business Combination Occurs and the Consideration Paid Exceeds

question 31

Multiple Choice

If a business combination occurs and the consideration paid exceeds the fair value of the identifiable net assets of the subsidiary on the acquisition date and the parent acquires less than 100% of the outstanding common shares of the subsidiary, which consolidation method will result in the highest value for non-controlling interest on the acquisition date?

• A) The proprietary theory.
• B) The parent company theory.
• C) The entity theory.
• D)The parent company extension theory.

---

Definitions:

Carrying Amount

The value at which an asset is recognized on the balance sheet after deducting accumulated depreciation or amortization.

Investment Account

A financial account held at a financial institution that is used for the purpose of holding and managing investments such as stocks, bonds, mutual funds, and other assets.

Equity Method

An accounting technique used by a company to record its investment in another company when it has significant influence over that company but does not fully control it.

Investment Account

An account held at a financial institution that is used to buy and hold investment assets, such as stocks, bonds, and mutual funds.