One Company Acquires Another Company in a Combination Accounted for Under

question 103

Multiple Choice

One company acquires another company in a combination accounted for under the acquisition method.The acquiring company decides to apply the initial value method in accounting for the combination.What is one reason the acquiring company might have made this decision?

• A) It is the only method allowed by the SEC.
• B) It is relatively easy to apply.
• C) It is the only internal reporting method allowed by generally accepted accounting principles.
• D) Operating results on the parent's financial records reflect consolidated totals.
• E) When the initial method is used, no worksheet entries are required in the consolidation process.

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Definitions:

Bankruptcy Code

The set of laws codified as Title 11 of the United States Code, governing bankruptcy proceedings in the US.

Health Care Business

An enterprise that provides medical services, manufactures medical equipment, or engages in healthcare-related activities.

Bankruptcy

A legal status of a person or entity that cannot repay debts owed to creditors, leading to legal proceedings to resolve the financial issues.

Patient Records

Patient records are detailed and confidential documents that contain the medical history, treatments, and health information of individuals under care.