Paxton Corporation acquired all of the outstanding voting stock of Stanley Company. How should the assets and liabilities of the acquired company be reported on the consolidated ﬁnancial statements immediately after the acquisition?
A) Nominal estimated values determined by the parent company.
B) Market values on the date of the acquisition.
C) The previously reported book values.
D) Market values on the date of the acquisition less accumulated depreciation.

Question

Quizplus · Accepted Answer

The assets and liabilities of the acquired company should be reported at their market values on the date of the acquisition in the consolidated financial statements. This approach aligns with the acquisition method of accounting for business combinations, which requires that the assets acquired and liabilities assumed be measured at their fair values as of the acquisition date.

Paxton Corporation Acquired All of the Outstanding Voting Stock of Stanley