The accounting problem in a lump sum sale of shares is the allocation of the proceeds between the classes of securities. One acceptable method of allocation is the
A) pro forma method.
B) relative fair value method.
C) direct method.
D) indirect method.

Question

Quizplus · Accepted Answer

The relative fair value method is the most acceptable method of allocation in a lump sum sale of shares. This method considers the fair value of each class of securities and allocates the proceeds based on their relative fair value. This method provides a more accurate reflection of the value of each class of securities and is therefore the most appropriate method to use.

The Accounting Problem in a Lump Sum Sale of Shares