Husch Ltd Acquired 35% of the Common Shares of Megia Ltd

question 3

Multiple Choice

Husch Ltd. acquired 35% of the common shares of Megia Ltd. on June 30, 20X1. Husch uses the equity method to record its investment. On June 30, 20X8, Husch acquired another 40% of Megia's common shares. At June 30, 20X8, how should the original 35% ownership be treated?

• A)The original valuation of the 35% is added to the valuation of the 40%.
• B)The original 35% investment is deemed to have been disposed of and reacquired at the fair value at June 30, 20X8, and added to the new acquisition.
• C)The carrying value of the original 35% at June 30, 20X8, is added to the new acquisition.
• D)The original 35% is irrelevant to the new acquisition and should be ignored.

---

Definitions:

Proficiency

The state of being skilled or competent in a particular activity or field.

Specialized Knowledge

Expertise or information in a specific field, distinguishing one from lay knowledge.

Participative Leadership

A philosophy of and approach to leadership that taps the constructive power of people, resulting in both a humanistic and productive workplace. The participative leader begins by involving people, which is necessary to achieve understanding, which is necessary to achieve commitment. See democratic and empowerment.

Commitment

A pledge or promise to do something, often involving dedication and loyalty towards a goal, project, or relationship.