One Company Acquires Another Company in a Combination Accounted for as an Acquisition

question 7

Multiple Choice

One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the initial value method in accounting for the combination. What is one reason the acquiring company might have made this decision?

• A) It is the only method allowed by the SEC.
• B) It is relatively easy to apply.
• C) It is the only internal reporting method allowed by generally accepted accounting principles.
• D) Operating results on the parent's financial records reflect consolidated totals.
• E) When the initial method is used, no worksheet entries are required in the consolidation process.

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Definitions:

Market Value Of Equity

The total dollar value of a company's shares of stock on the open market.

Employee Absenteeism

The habitual non-presence of an employee at work, which can affect productivity and operational efficiency.

Lost-Time Accidents

Workplace incidents resulting in an employee being unable to work for a period of time, causing loss of productivity and potentially incurring costs associated with workers' compensation.

Customer Satisfaction

An evaluation of the degree to which a company's products or services exceed or fulfill customer expectations.