When Using the Acquisition Method for Accounting for Business Combinations,all

question 7

Multiple Choice

When using the acquisition method for accounting for business combinations,all of the following statements are false regarding the sale of subsidiary shares except:

• A)If control ceases to exist and significant influence ceases to exist,the difference between selling price and acquisition value is recorded as a realized gain or loss
• B)If control ceases to exist and significant influence ceases to exist,the difference between selling price and acquisition value is recorded as an unrealized gain or loss
• C)If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as a realized gain or loss
• D)If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as an unrealized gain or loss
• E)If control ceases to exist and significant influence ceases to exist,the difference between selling price and carrying value is recorded as an adjustment to retained earnings

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Definitions:

Volume Variance

A difference between actual and budgeted sales or production volumes, impacting costs and profitability.

Variable Component

Part of a cost or expense that varies with changes in activity level, production volume, or sales.

Fixed Component

The portion of a cost that remains constant regardless of the level of activity or output.

Overhead Efficiency

A measure of how effectively a business uses its overhead costs in the production process, often improving profit margins when increased.