Which of the following is not an advantage of the parent issuing shares of stock in exchange for the subsidiary common shares being acquired?
A)It is not necessary to determine the fair values of the subsidiary's net assets.
B)It may allow the subsidiary's shareholders to have a tax free exchange.
C)It avoids the depletion of cash.
D)If the parent is publicly held, the share price is readily determinable.

Question

Which of the following is not an advantage of the parent issuing shares of stock in exchange for the subsidiary common shares being acquired?
A)​It is not necessary to determine the fair values of the subsidiary's net assets.
B)​It may allow the subsidiary's shareholders to have a tax free exchange.
C)​It avoids the depletion of cash.
D)​If the parent is publicly held, the share price is readily determinable.

Quizplus · Accepted Answer

The fair values of the subsidiary's net assets must still be determined in order to record the acquisition, regardless of whether the parent issues shares of stock or not. The other options are advantages of issuing shares in exchange for subsidiary common shares.

Which of the Following Is Not an Advantage of the Parent