A is corrent. Under the acquisition method, the acquired assets and liabilities are reported at their fair values. Therefore, Company X should report Company Y’s inventories and long-term debt at their fair values.
B is incorrect. Under the acquisition method, the acquired assets and liabilities are reported at their fair values.
C is incorrect. Under the acquisition method, the acquired assets and liabilities are reported at their fair values.
D is incorrect. Under the acquisition method, the acquired assets and liabilities are reported at their fair values.
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