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:

Sales Discount

A reduction in the price of a product or service offered to customers to encourage prompt payment.

FOB Shipping Point

A term used in shipping contracts to indicate that the buyer is responsible for the cost and risk of loss or damage once the goods are shipped by the seller.

Perpetual Inventory Method

A system that records the sale or purchase of inventory immediately through the use of computerized point-of-sale systems and enterprise asset management software.

Accounts Payable-Emma Co.

The amount of money Emma Co. owes to its suppliers or creditors for items or services purchased on credit.