The accounting method used in most mergers is the ____ method.
A) pooling of interests
B) purchase
C) consolidation
D) merger

Question

Quizplus · Accepted Answer

The purchase method is the most commonly used accounting method in mergers. Under this method, the acquiring company records the assets and liabilities of the acquired company at fair value and recognizes goodwill as the excess of purchase price over the fair value of net assets acquired. This method provides a more accurate representation of the financial position of the combined entity as it values the assets and liabilities at their current market value. The pooling of interests method is no longer allowed under GAAP, and the consolidation and merger methods are not specific accounting methods for mergers.

The Accounting Method Used in Most Mergers Is the ____