Question

A company acquires all of the voting stock of Previn Company, and records the transaction by debiting "Investment in Previn Company." The company is accounting for its investment as a:

Answer 1

Full question:

A company acquires all of the voting stock of Previn Company, and records the transaction by debiting “Investment in Previn Company.” The company is accounting for its investment as a

a. statutory consolidation.

b. variable interest entity.

c. joint venture.

d. stock acquisition.

Answer:

The company is accounting for its investment as a stock acquisition

Explanation:

In a stock acquisition, a purchaser obtains an objective company’s assets undeviatingly from the merchandising sharers. With a stock trade, the purchaser is pretending possession of both assets and contracts – including latent contracts from former activities of the market.

The purchaser is solely moving into the shoes of the former landlord and the trade proceeds. Juxtapose this to another way of acquisition, an asset dealings. Following the closing of the stock acquisition, the scapegoat will endure as it survived ere the acquisition concerning its possession of assets and contracts.