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?
A) The assets and liabilities of Crafts to Go Corporation would be not revalued and disclosed at their market values on the date of acquisition.
B) Fun with Florals will use the equity method of accounting for this investment.
C) Fun with Florals will report Crafts to Go Corporation's revenues and expenses on a consolidated statement of earnings.
D) Fun with Florals will use the market value method of accounting for this investment.

Question

Quizplus · Accepted Answer

Under the purchase method (now known as the acquisition method under IFRS 3 and ASC Topic 805), when a parent company acquires another company, the parent consolidates the subsidiary's financial statements with its own, including reporting the subsidiary's revenues and expenses on a consolidated statement of earnings.

Fun with Florals Corporation Acquired All the Voting Shares of Crafts