Which of the Following Methods of Accounting for a Business

question 6

Multiple Choice

Which of the following methods of accounting for a business combination assumes that the parent company purchases the subsidiary and must account for the acquisition as it would for the acquisition of any asset?

• A)Pooling of interests
• B)The purchase method
• C)The new entity approach
• D)Proportionate consolidation

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Definitions:

Normal Return

The typical profit that is expected from a standard investment or business activity, accounting for the cost of capital.

Computer Software

Programs and operating information used by a computer to perform specific tasks.

Total Revenue

The total income received by a firm from the sale of its goods or services before any costs or expenses are deducted.

Opportunity Cost

The value of the next best alternative that is forgone when making a decision.