A Parent Company Acquired 100% of the Outstanding Common Stock

question 6

Multiple Choice

A parent company acquired 100% of the outstanding common stock of another corporation.The parent is going to use push-down accounting.The fair market value of each of the acquired corporation's assets is lower than its respective book value.The fair market value of each of the acquired corporation's liabilities is higher than its respective book value.The acquired corporation has a deficit in the Retained Earnings account.Which one of the following statements is correct?

• A)The push-down capital account will have a credit balance after this transaction is posted.
• B)The push-down capital account will have a debit balance after this transaction is posted.
• C)The push-down capital account will have either a debit or a credit balance depending upon whether the asset adjustments exceed the liability adjustments,or vice versa.
• D)Subsidiary Retained Earnings will have a deficit balance after this transaction is posted.

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Definitions:

Diffusion of Responsibility

A socio-psychological phenomenon whereby a person is less likely to take responsibility for action or inaction when others are present.

Bystander Intervention

The act of someone stepping in to help or intervene when they see another person in trouble, influenced by various psychological and situational factors.

Emergency Response

The organization and deployment of services and resources in reaction to emergencies to minimize their adverse effects.

Bodily Harm

Physical injury, pain, disease, or impairment inflicted on a person's body.