One Company Acquires Another Company in a Combination Accounted for Under

question 39

Multiple Choice

One company acquires another company in a combination accounted for under the acquisition method. The acquiring company decides to apply the equity 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 equity method is used, no worksheet entries are required in the consolidation process.

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Definitions:

Supportive Leadership

A leadership style characterized by a focus on the well-being and needs of team members.

Intrinsically Satisfying

Activities or tasks that are intrinsically satisfying bring joy and fulfillment in themselves, without the need for external rewards or recognition.

Mediating Variables

Factors that explain the relationship between two variables, often revealing the process or mechanism through which an effect occurs.

Path-goal Theory

A leadership theory that suggests a leader's behavior is directly related to the satisfaction, motivation, and performance of their subordinates by clarifying paths to achieve their goals.