On April 1,2020,Paxton Corporation acquired all of the outstanding voting common stock of Stanley Company and Stanley will remain a separate corporation.Stanley's year-end is December 31.How should the assets and liabilities of Stanley be reported on the consolidated financial statements when Stanley is combined with Paxton on April 1,2020?

A) At book values at the April 1,2020 date of acquisition.
B) At fair values at the April 1,2020 date of the acquisition.
C) At book values at December 31,2019.
D) At fair values at December 31,2019 less accumulated depreciation calculated on the difference between book and fair values since that date.

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Megan McCurdy · Accepted Answer

Final Answer : B, Explanation :  When a company acquires another company, the assets and liabilities of the acquired company need to be reported on the consolidated financial statements at their fair values as of the acquisition date. This provides a more accurate representation of the true value of the assets and liabilities that are being acquired. Therefore, Option B is the best choice, and Options A, C, and D are not appropriate.

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