Answer (A) is correct . In a business combination legally structured as a merger, the assets and liabilities of one of the combining companies are transferred to the books of the other combining company (the surviving company). The surviving company continues to exist as a separate legal entity. The nonsurviving company ceases to exist as a separate entity. Its stock is canceled, and its books are closed.
Answer (B) is incorrect because It describes a consolidation, in which a new firm is formed to account for the assets and liabilities of the combining companies.
Answer (C) is incorrect because It describes an acquisition. A parent-subsidiary relationship exists when the investor holds more than 50% of the outstanding stock of the investee.
Answer (D) is incorrect because It describes an acquisition. A parent-subsidiary relationship exists when the investor holds more than 50% of the outstanding stock of the investee.
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