When a Parent Uses the Acquisition Method for Business Combinations

question 67

Multiple Choice

When a parent uses the acquisition method for business combinations and sells shares of its subsidiary, which of the following statements is false?

• A) If majority control is still maintained, consolidated financial statements are still required.
• B) If majority control is not maintained but significant influence exists, the equity method to account for the investment is still used but consolidated financial statements are not required.
• C) If majority control is not maintained but significant influence exists, the equity method is still used to account for the investment and consolidated financial statements are still required.
• D) If majority control is not maintained and significant influence no longer exists, a prospective change in accounting principle to the fair value method is required.
• E) A gain or loss calculation must be prepared if control is lost.

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Definitions:

Leydig Cells

Leydig cells, found in the testes, are responsible for the production of testosterone, a key hormone in the development of male secondary sexual characteristics.

Sustentacular Cells

Sustentacular cells, also known as supporting cells, provide physical support and nourishment to the spermatogenic cells within the seminiferous tubules of the testis.

Luteinizing Hormone

A hormone produced by the anterior pituitary gland that triggers ovulation in females and stimulates testosterone production in males.

Testosterone Production

The synthesis of the primary male sex hormone, testosterone, primarily in the testes, which influences male physical features and reproduction.