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.

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Definitions:

Vertical Spread

A trading strategy using options that involves buying and selling options of the same underlying security, same expiration date, but different strike prices.

Regression Line

A line of best fit through a dataset, used in regression analysis to model the relationship between a dependent variable and one or more independent variables.

Y-Intercept

The location on a graph where a line intersects with the y-axis.

Sample Y-Intercept

The point at which a sample regression line crosses the Y-axis, indicating the value of the dependent variable when all independent variables are zero.