Question

On December 18, 2024, Stephkado Corporation acquired 100 percent of a Swiss company for 4.019 million Swiss Francs (CHF). This acquisition reflects:

A) Historical cost valuation
B) Fair value
C) Amortized cost
D) Market value at the time of acquisition

Answer 1

The acquisition of the Swiss company by Stephkado Corporation reflects fair value. Fair value is the price at which the assets and liabilities should be valued on the acquisition date, reflecting the most accurate estimate of the market price.

Step-by-step explanation:

The acquisition of the Swiss company by Stephkado Corporation reflects fair value. Fair value is the price at which the assets and liabilities should be valued on the acquisition date, reflecting the most accurate estimate of the market price. It takes into account various factors such as market conditions, future cash flows, and the financial performance of the acquired company.

Here, the acquisition was made for 4.019 million Swiss Francs (CHF), which represents the fair value of the Swiss company at the time of acquisition.

It is important to note that fair value is considered a more reliable measure than historical cost valuation, which uses the original cost of acquiring assets. Fair value provides a current and realistic assessment of the value of the acquired company.