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Following are selected accounts for Green Corporation and Vega Company as of December 31, 2010. Several of Green's accounts have been omitted.
Following are selected accounts for Green Corporation and Vega Company as of December 31, 2010. Several of Green's accounts have been omitted.Green obtained 100% of Vega on January 1, 2006, by issuing 10,500 shares of its $10 par value common stock with a fair value of $95 per share. On January 1, 2006, Vega's land was undervalued by $40,000, its buildings were overvalued by $30,000 and equipment was undervalued by $80,000. The buildings have a 20-year life and the equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a 16-year remaining life. There was no goodwill associated with this investment.One company acquires another company in a combination accounted for as an acquisition. The acquiring company decides to apply the equity method in accounting for the combination. What is one reason the acquiring company might have made this decision?
