Under Which Set of Circumstances Would It Not Be Appropriate

question 3

Multiple Choice

Under which set of circumstances would it not be appropriate to assume the value the noncontrolling shares is the same as the controlling shares?

• A) The acquisition is for less than 100% of the subsidiary.
• B) The fair value of the noncontrolling shares can be inferred from the value implied by the acquisition price.
• C) Active market prices for shares not obtained by the acquirer imply a different value.
• D) The amount of the "control premium" cannot be determined .

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Definitions:

Activity-Based Costing

An accounting methodology that assigns costs to products or services based on the activities and resources that go into their production, providing more accurate product costing.

Predetermined Overhead Rate

A rate used to allocate overhead costs to products or services, calculated before the actual costs or activity levels are known.

Direct Labor-Hours

A measure of the labor time spent by workers who directly contribute to the manufacturing or creation of products.

Traditional Costing

A costing method that allocates overhead costs based on a single predetermined rate.