Fun with Florals Corporation acquired all the voting shares of Crafts to Go Corporation under the purchase method. Which of the following statements about the consolidated statements is true?

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Quizplus · Accepted Answer

Under the purchase method, Fun with Florals Corporation will report Crafts to Go Corporation's revenues and expenses on a consolidated income statement, as well as consolidate their assets and liabilities. The market value method is not relevant, as this investment was made through the purchase of all voting shares, not through the market. The assets and liabilities of Crafts to Go Corporation would be revalued and disclosed at their fair values on the date of acquisition, not market values. The equity method is used when a company has significant influence over another company, but not when it has acquired all voting shares through purchase.

Fun with Florals Corporation Acquired All the Voting Shares of Crafts