In a 1976 discussion memorandum, the FASB defined the new entity approach to accounting for business combinations as a method which:
a. results in the assets and liabilities of the subsidiary being valued at market value at the time of acquisition, and the parent’s assets and liabilities being valued at book value.
b. results in the assets and liabilities of the parent being valued at market value at the time of acquisition, and the subsidiary’s assets and liabilities being valued at book value.
c. results in all entities’ assets and liabilities being revalued to market values at the time the combination originates.
d. uses the book values of the combining companies.
ANSWER: C
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McClure Corp purchased raw materials with a cost of $86,000. Credit terms of 3/10, n/60 apply. If McClure uses the net price method, the purchase should be recorded as
A) $77,400 B) $86,000 C) $83,420 D) $88,580
If a company using the adjusted sales value method to assign joint costs produces two products, A and B, from a joint process, and B requires additional processing after the split-off in order to be salable, how is the joint cost allocated to B determined?
a. The costs of the additional processing are ignored in allocating joint costs. b. The costs of the additional processing are subtracted from the joint costs allocated to B. c. The relative sales value used to allocate the joint cost are determined after the costs of further processing are subtracted from the ultimate sales value of B. d. None of these are correct.
If the assignee fails to provide notice of assignment to the obligor and the obligor continues to render performance to the assignor, the assignee can sue the obligor
Indicate whether the statement is true or false
As a mode of transportation, railroad freight would be LEAST suited for
A. coal. B. fresh fruit. C. automobiles. D. iron ore. E. sand.