Which of the following methods of accounting for a business combination assumes that the parent company purchases the subsidiary and must account for the acquisition as it would for the acquisition of any asset?
a. Pooling of interests
b. The purchase method
c. The new entity approach
d. Proportionate consolidation
ANSWER: B
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LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account. During the year, a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800. How much cash did LePage pay for insurance during the year?
A. $17,400 B. $18,800 C. $16,600 D. $17,000
Sensitivity analysis measures a project's stand-alone risk by showing how much the project's NPV (or IRR) is affected by a small change in one of the input variables, say sales. Other things held constant, with the size of the independent variable graphed on the horizontal axis and the NPV on the vertical axis, the steeper the graph of the relationship line, the more risky the project, other things held constant.
Answer the following statement true (T) or false (F)
Adding gourmet coffee stations to my convenience store is expected to increase sales of my
breakfast sandwiches; however, the sales of breakfast sandwiches should not be included in the evaluation of the gourmet coffee project because only relevant, incremental cash flows should be considered.
A specific amount of money paid for each hour of work is called
A. salary. B. wage. C. benefits. D. bonus. E. compensation.