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

Question

Quizplus · Accepted Answer

The initial value method is relatively easy to apply because it involves recording the investment at cost and recognizing income only when dividends are received.

One Company Acquires Another Company in a Combination Accounted for Under