Which of the Following Statements Regarding Consolidated Financial Statements at the Date

question 25

Multiple Choice

Which of the following statements regarding consolidated financial statements at the date of acquisition is FALSE?

• A)Fair value adjustments are used to recognize the identifiable assets and liabilities of the subsidiary at fair values and goodwill measured as a residual amount.
• B)The pre-acquisition adjustments eliminate the pre-acquisition equity of the subsidiary and the investment account recorded by the parent.
• C)When the subsidiary has recorded goodwill at acquisition date, adjustments must be made in the acquisition analysis to determine the amount of goodwill to be adjusted in the consolidation process.
• D)When the subsidiary has recorded a dividend payable at acquisition date, this must be excluded when calculating the consideration received.

---

Definitions:

True Variable Cost

Costs that vary directly and proportionally with the level of production or activity within a business.

Fixed Cost

Expenses that do not change in total despite fluctuations in production or sales volume.

Mixed Cost

A cost consisting of both fixed and variable components and which is thus partially affected by changes in the level of activity.

Charitable Contribution

Monetary or in-kind donations given to charitable organizations, often eligible for tax deductions.