Question

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

(A) It is relatively easy to apply.
(B) It is the only internal reporting method allowed by generally accepted accounting principles.
(C) When the initial method is used, no worksheet entries are required in the consolidation process.
(D) It is the only method allowed by the SEC
(E) Operating results on the parent's financial records reflect consolidated totals.

Answer 1

Answer: Option E: Operating results on the parent's financial records reflect consolidated totals.

Explanation: Operating results on the parent's financial records reflect consolidated totals is the reason the acquiring company might have made this decision