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

question 43

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


Definitions:

Trade

Conducting transactions involving the exchange, sale, or purchase of goods and services by or among people and countries.

Consuming Outside

The act of purchasing and enjoying goods or services outside one’s home, such as dining at restaurants or outdoor markets.

Opportunity Cost

The sacrifice involved in not picking the subsequent preferable option at the time of decision-making.

Freight Train

A train that is used for transporting goods, cargoes, and commodities rather than passengers.

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