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:

Routine Tasks

Tasks that are regularly performed in a set manner, often characterized by a lack of novelty and the requirement for minimal conscious effort.

Unusual Tasks

Activities that deviate from what is commonly expected or considered normal, often requiring unique or creative approaches.

Group

Two or more people who share a common definition and evaluation of themselves and behave in accordance with such a definition.

Social Group

describes a collection of individuals who share some form of interaction, common goals, or a sense of belonging, typically characterized by social cohesion and group identity.