Asked by Amber Harris on Jul 28, 2024
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Inventory was acquired as part of a business combination at the end of 20X1. The inventory was sold in 20X2. How should the fair value increment for the inventory at acquisition be treated for consolidation at the end of 20X2?
A) It should be added to inventory.
B) It should be added to sales.
C) It should be added to the cost of goods sold.
D) It should be added to retained earnings.
Fair Value Increment
The increase in the recorded cost of an asset over its previously recognized value, often assessed during business combinations to reflect current market valuations.
Business Combination
The process of merging two or more companies into one, where one company survives and the others cease to exist, often aiming for strategic, operational, or financial synergies.
Inventory
The goods and materials held by a company for the ultimate goal of resale or manufacturing into final products.
- Acquire knowledge about the method of consolidating financials, which involves eliminating non-realized profits in transactions among subsidiaries.
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Learning Objectives
- Acquire knowledge about the method of consolidating financials, which involves eliminating non-realized profits in transactions among subsidiaries.
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