Asked by Carlos Trejo on Jun 20, 2024
Verified
On the date that one company acquires 100% of the voting stock of another company,the book value of the acquired assets and liabilities will be combined with book values of the assets and liabilities of the acquiring company.
Voting Stock
Shares that give the shareholder the right to vote on matters of corporate policy and the election of the board of directors.
Book Value
The net value of a company's assets minus its liabilities, essentially representing the total value of the company's assets that shareholders would theoretically receive if the company were liquidated.
- Understand the accounting consequences of mergers and acquisitions, specifically how goodwill is treated.
- Understand the integration process and its impacts on both the balance sheet and income statement.
Verified Answer
JA
Jenika AtanacioJun 26, 2024
Final Answer :
False
Explanation :
When one company acquires 100% of the voting stock of another company, the acquired assets and liabilities are typically recorded at their fair market value, not their book value, on the acquisition date. This process is part of purchase accounting and may result in the recognition of goodwill if the purchase price exceeds the fair value of the net assets acquired.
Learning Objectives
- Understand the accounting consequences of mergers and acquisitions, specifically how goodwill is treated.
- Understand the integration process and its impacts on both the balance sheet and income statement.