Which Method of Accounting Will Generally Be Used When One

question 47

Multiple Choice

Which method of accounting will generally be used when one company purchases between 20% to 50% of the outstanding stock of another company?

• A)Only the fair value method may be used.
• B)Only the equity method may be used.
• C)The GAAP prescribed the equity method may be used.
• D)The GAAP prescribed the fair value method may be used.

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Definitions:

Merchantability

A guarantee that a product sold meets certain quality standards and is fit for the ordinary purposes for which such goods are used.

UCC

The Uniform Commercial Code represents a collection of statutes offering legal guidelines and regulations for commercial or business activities and transactions within the United States.

CISG

The treaty known as the United Nations Convention on Contracts for the International Sale of Goods sets a standardized law for international sales transactions.

Sales Contract

A legally binding agreement between a buyer and a seller detailing the terms and conditions of the sale of goods or services.