Which of the Following Statements Is True Regarding the Acquisition

question 117

Multiple Choice

Which of the following statements is true regarding the acquisition method of accounting for a business combination?

• A) The combination must involve the exchange of equity securities only.
• B) The transaction establishes an acquisition fair value basis for the company being acquired.
• C) The two companies may be about the same size, and it is difficult to determine the acquired company and the acquiring company.
• D) The transaction may be considered to be the uniting of the ownership interests of the companies involved.
• E) The acquired subsidiary must be smaller in size than the acquiring parent.

---

Definitions:

Contribution

A payment or effort made towards a collective goal or to support a cause.

Insurable Interest

A legitimate stake or investment in the life, property, or well-being of the subject matter of an insurance policy, such that the policyholder would suffer financial loss if the insured event occurs.

Life Insurance

An insurance policy that pays out a sum of money on the death of the insured person or after a set period.

Repaid

The action of paying back money that has been borrowed, often including an interest component.