Question #22
Reading: Reading 8 Intercorporate Investments
PDF File: Reading 8 Intercorporate Investments.pdf
Page: 9
Status: Correct
Correct Answer: A
Question
Sawbuck Corporation recently acquired a 60% stake in Rawboard Inc. for $70 million in newly issued common stock. Given this information, which of the following methods should be used to account for the acquisition of Rawboard?
Answer Choices:
A. The pooling of interest method
B. Proportionate consolidation
C. Acquisition
Explanation
When the parent company has at least a 50% ownership stake and control over the
subsidiary, the acquisition method is used.